Hormel Foods Faceing a lot of market challenges in Q3

by Editor fleischwirtschaft.com
Tuesday, August 27, 2019
Photo: Hormel Foods

Hormel Foods Corp. faced a lot of market challenges in the third quarter: higher avocado prices in California, African Swine Fever in China and the negative impact of Jennie-O Turkey Store voluntary product recalls.

Amid the uncertainty, the company still reported financial results that were followed by a rise in its stock price.

Hormel’s net earnings of $199.4 mill., or 37 cents per share on the common stock, in the quarter ended 28 July were down 5% from $210.4 mill., or 40 cents per share, in the third quarter of the previous year. Net sales slipped 3% to $2,290.8 mill. from $2,359.1 mill. as the divestiture of the CytoSport business impacted sales negatively. Hormel in April completed the sale of CytoSport to PepsiCo. Inc. for $465 mill. Third-quarter organic net sales were flat.

Hormel’s stock on the New York Stock Exchange closed at $42.95 per share on 22 August, the day third-quarter results were announced, which was up nearly 5% from a close of $40.97 per share on 21 August.

In the third quarter, double-digit earnings growth in Hormel’s Refrigerated Foods segment offset weaker results in Grocery Products.

Within Refrigerated Foods, segment profit rose 13% to $171.8 mill. Net sales increased 1% to $1,301.1 mill. Hormel reported strong demand for food service items like Hormel Bacon 1 cooked bacon, Old Smokehouse raw bacon and Hormel Fire Braised products. Within Grocery Products, segment profit fell 30% to $58.8 mill. Net sales dropped 11% to $543.1 mill. Sales were strong for the brands Spam, Don Miguel, Dinty Moore and Herdez.

Within Jennie-O Turkey Store, two voluntary product recalls continued to impact the retail business negatively. Segment profit fell 9% to $21.3 mill. Net sales dropped 5% to $298.8 mill.

In International and Other, segment profit rose 1% to $18.8 mill. Net sales of $147.7 mill. were flat when compared to the previous year’s third quarter. Improved results in China offset the divestiture of CytoSport.

For the 39 weeks ended 28 July, Hormel Foods posted net earnings of $723.6 mill., or $1.35 per share on the common stock, which were down 3.7% from $751.1 mill., or $1.42 per share, in the same time of the previous year. Net sales of $6,995.8 mill. were down 0.4% from $7,021 mill.

Hormel Foods reaffirmed earnings guidance of $1.71 to $1.85 per share for the fiscal year.