Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Hormel Foods Corp (HRL, Financial) achieved a 1% organic net sales growth in the first quarter, driven by strong demand for key brands like SPAM, Applegate, and Hormel Black Label.
• The company reported strong performance in its foodservice segment, with premium prepared proteins achieving a fifth consecutive quarter of double-digit net sales growth.
• Hormel Foods Corp (HRL) is making significant progress in its Transform and Modernize (T&M) initiative, which is expected to deliver $100 million to $150 million in additional benefits in fiscal 2025.
• The Planters brand is on track for recovery, with improved fill rates, distribution gains, and accelerated innovation contributing to its sequential market recovery.
• The company is committed to dividend growth, having paid its 386th consecutive quarterly dividend, reflecting a 3% increase over the previous year.

Negative Points

• Hormel Foods Corp (HRL) faced margin pressures due to higher commodity input costs, including pork, beef, and nuts, as well as supply chain impacts from bird illnesses.
• The company experienced negative impacts from lower year-over-year whole-bird turkey markets and lower investment income.
• Hormel Foods Corp (HRL) anticipates continued pressures in the turkey supply chain due to bird diseases, which may affect profitability.
• The company expects its bottom line for the second quarter to be comparable to the first quarter and below the prior year, due to ongoing challenges.
• Hormel Foods Corp (HRL) is navigating a challenging macro environment, which has impacted its ability to achieve higher earnings growth in the near term.

Q & A Highlights

Q: Can you elaborate on the EPS cadence and the confidence in achieving the back half targets? A: James Snee, CEO, explained that the value-added business in retail continues to perform well, and the Planters recovery is on track. The company expects broad-based growth in Foodservice and favorable year-over-year comps in the second half. Strategic pricing actions have been taken in the turkey supply chain, which will benefit Q3 and Q4. Jacinth Smiley, CFO, added that Planters and the Transform & Modernize (T&M) initiative will contribute significantly to bottom-line growth in the second half.

Q: Could you provide more details on the pressures in the turkey supply chain and the pricing actions taken? A: James Snee, CEO, noted that strategic pricing actions have been implemented across the turkey complex due to turkey illnesses and high commodity prices. John Ghingo, EVP of Retail, added that value-added turkey, particularly ground turkey, aligns with consumer needs for lean protein sources and is experiencing strong demand.

Q: Can you discuss the CEO succession planning and whether there is a focus on internal or external candidates? A: James Snee, CEO, emphasized the importance of selecting the right CEO and mentioned that the search committee is considering both internal and external candidates. The process aims to ensure a smooth transition, with Snee remaining engaged and available as a strategic adviser until the transition is complete.

Q: How are you addressing the challenges in the Planters business, and what is the outlook for its recovery? A: John Ghingo, EVP of Retail, stated that the Planters facility is fully operational, and distribution is recovering. The company is ramping up advertising and promotions, with a focus on innovation to attract new consumers. Sequential improvement is expected in Q2, with stronger growth anticipated in the second half.

Q: What are the expectations for price mix and volume in the retail segment, considering the strong pricing environment? A: James Snee, CEO, highlighted the strength of the value-added portfolio across retail, foodservice, and international segments. John Ghingo, EVP of Retail, noted that despite pricing impacts, volume consumption in retail is stable, and the company expects to maintain and grow both volume and sales.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.