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Hormel Foods (HRL) New Operating Model Is Likely to Fuel Growth

·3 min read

Hormel Foods Corporation HRL unveiled a new operating model to better align its business structure and make it more easygoing, market-driven and consumer and customer focused. The company’s new strategic model, which will take effect from Oct 31, 2022 (fiscal 2023 beginning), will include three operating units – Retail, Foodservice and International.

The updated model is a culmination of Hormel Foods’ recently undertaken strategies, including several buyouts like the Planters snacking business, the modernization of technology and e-commerce capacities, transformational endeavors at Jennie-O Turkey Store and the formation of One Supply Chain. The One Supply Chain team will keep overseeing HRL’s global supply chain following the formation of the new operating units.

We note that the new operating model will help facilitate Hormel Foods’ six strategic priorities. These include protecting and strengthening core brands, expanding foodservice leadership, solidifying global presence, boosting scale across the snacking and entertaining categories, boosting growth in its traditional and food-forward portfolios and continuing to transform the company.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Operating Segments in Detail

Retail, the company’s biggest operating segment, will consist of the company’s most iconic brands, such as Planters, Corn Nuts, SPAM, SKIPPY, Columbus, Jennie-O, Hormel Black Label, Herdez, WHOLLY, Applegate, Hormel Natural Choice and Justin's. This unit will be focused on Hormel Foods’ core consumer brands in the retail space.

The Foodservice unit will cater to leading foodservice setups, such as hotels, restaurants, convenience stores and entertainment venues, educational and health care institutions. Sales in the foodservice channel have been constantly benefiting from the company’s robust brand portfolio and market-leading pizza topping and bacon categories. The new Foodservice division will combine the company's domestic foodservice businesses. Also, it will be focused on teaming up with new customers for offering culinary solutions.

The International segment will remain focused on strengthening its presence outside the United States. This includes expanding global brands like SPAM and SKIPPY, speeding up growth and investment in China, Brazil and Indonesia and utilizing alliances in the Philippines, South Korea and Europe. Hormel Foods recently unveiled that it plans to open a new R&D and innovation center in China in fiscal 2023, which will be the hub of innovation and culinary creation for the Asia-Pacific region.

We believe that the new and more refined organization is likely to fuel growth at Hormel Foods. Shares of this Zacks Rank #3 (Hold) company have increased 4% in the past six months against the industry’s decline of 11.8%.

Solid Consumer Staple Stocks

Some better-ranked consumer staple stocks are The Chef's Warehouse CHEF, Campbell Soup CPB and General Mills GIS.

The Chef's Warehouse, which engages in the distribution of specialty food products, sports a Zacks Rank #1 (Strong Buy). The Chef's Warehouse has a trailing four-quarter earnings surprise of 372.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for CHEF’s current financial-year earnings per share suggests significant growth from the year-ago reported number.

Campbell Soup, which manufactures and markets food and beverage products, carries a Zacks Rank #2 (Buy). Campbell Soup has a trailing four-quarter earnings surprise of 10.8%, on average.

The Zacks Consensus Estimate for CPB’s current financial-year sales suggests growth of 4.7% from the year-ago reported number.

General Mills, which manufactures and markets branded consumer foods, currently carries a Zacks Rank #2. General Mills has a trailing four-quarter earnings surprise of 6.5%, on average.

The Zacks Consensus Estimate for GIS’ current financial-year sales suggests growth of 1.7% from the year-ago reported figure.

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