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HORMEL FOODS REPORTS RECORD SALES AND DOUBLE-DIGIT EARNINGS GROWTH IN THE SECOND QUARTER

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The company reaffirms its full-year sales expectations and narrows its earnings guidance range

AUSTIN, Minn., June 2, 2022 /PRNewswire/ -- Hormel Foods Corporation (NYSE: HRL), a leading global branded food company, today reported results for the second quarter of fiscal 2022. All comparisons are to the second quarter of fiscal 2021 unless otherwise noted.

Hormel Foods corporate logo
Hormel Foods corporate logo

EXECUTIVE SUMMARY

SECOND QUARTER

  • Volume of 1.2 billion lbs., down 2%; organic volume1 down 8%

  • Record net sales of $3.1 billion, up 19%; organic net sales1 up 10%

  • Operating income of $335 million, up 16%

  • Operating margin of 10.8%, compared to 11.1% last year and 10.5% last quarter

  • Pretax earnings of $322 million, up 10%

  • Effective tax rate of 18.7%, compared to 22.1% last year

  • Diluted earnings per share of $0.48, up 14% compared to last year

  • Cash flow from operations of $193 million, up 24%

EXECUTIVE COMMENTARY
"We delivered strong top- and bottom-line growth during the quarter, leveraging our balanced business model, leading brands and experienced management team," said Jim Snee, chairman of the board, president and chief executive officer. "The second quarter marked our sixth consecutive quarter of record sales, and we achieved earnings growth for the third consecutive quarter. Operating margin increased compared to the first quarter, an indication that our efforts to mitigate inflationary pressures are working. We also made meaningful progress across our supply chain, where our investments in capacity and a recovery in staffing levels contributed to improved fill rates, inventories and production volumes. These excellent results further demonstrate our team's ability to execute in difficult operating conditions and support the value of our clear strategic priorities."

"Consumer and operator demand for our leading brands remained robust during the quarter, and we continue to realize the benefits of investments in our direct sales force, diversified product portfolios, increased advertising, brand building and innovation," Snee said. "Double-digit organic sales growth was driven by our foodservice businesses, retail brands such as WHOLLY®, SKIPPY®, Hormel® Square TableTM, SPAM®, Hormel® Gatherings®, Dinty Moore® and Jennie-O®, and strong contributions from our food-forward brands, including Columbus® and Applegate®. Results for our Planters® snack nuts business improved throughout the quarter, and we are realizing the positive impact of the scale this business brings to our company, especially in the important and fast-growing convenience store channel. Our brands have responded well to pricing actions, and we are actively managing pricing and promotional levers to ensure the long-term health of our brands and the categories in which they compete."

"Earnings growth this quarter was a result of the balance we have built across our business," Snee said. "Our Jennie-O Turkey Store segment had an outstanding quarter, as its ability to adjust to current market conditions and meet strong foodservice demand drove higher results. Likewise, our foodservice businesses in Refrigerated Foods were able to manage inflation and deliver excellent volume gains. Strong performances in these businesses offset elevated freight costs across all segments and a decline in Grocery Products, which absorbed higher costs for certain inputs, such as avocados, protein and packaging. As we continue to operate in this highly inflationary environment, we will remain focused on improving our supply chain performance, maximizing promotional effectiveness and mix, and, where necessary, taking additional pricing actions to mitigate persistent inflationary pressures."

"After an excellent first quarter and significant profit growth in the second quarter, our Jennie-O Turkey Store team is facing an uncertain period ahead," Snee said. "We are actively managing the impacts from highly pathogenic avian influenza (HPAI) on turkey supply and will take the appropriate actions to protect the health of the turkeys across our supply chain. Similar to what we experienced in 2015, HPAI is expected to have a meaningful impact on industry poultry supplies over the coming months. Beginning in the third quarter, we anticipate large supply gaps in the Jennie-O Turkey Store vertically integrated supply chain, caused by flock losses to date. Our dedicated and experienced team is managing through operational challenges caused by the outbreaks and adapting to changing business conditions. The team has shown unwavering commitment and resolve in the face of a very difficult situation."

OUTLOOK
"We have a responsibility to protect the equity of our brands and ensure we meet the needs of our customers, consumers and operators," Snee said. "Based on our strong first-half performance and current outlook for the full year, we are reaffirming our sales expectations and narrowing our earnings guidance range. We are confident in our ability to deliver our sales guidance, given robust demand for our brands across the retail, foodservice and international channels, improvements in our supply chain, our investments in capacity and from strategic pricing actions. From an earnings perspective, we expect a strong finish to the year from our Refrigerated Foods business. We anticipate a fourth-quarter improvement from pricing actions taken across our Grocery Products portfolio. Additionally, we are navigating the impact of HPAI on the Jennie-O Turkey Store supply chain and external factors affecting the International & Other segment, including current export logistics challenges and COVID-related lockdowns in China. Our teams have actions in place to manage through these challenges and drive results for the company."

Fiscal 2022 Outlook


Previous


Updated

Net Sales Guidance (in billions)


$11.7 - $12.5


$11.7 - $12.5

Diluted Earnings per Share Guidance


$1.87 - $2.03


$1.87 - $1.97

STRATEGIC EVOLUTION UPDATE
Planters® Snack Nuts Business Integration
"We successfully completed the integration of all aspects of the Planters® snack nuts business during the second quarter, and the business continues to perform at the high end of our expectations," Snee said. "Since our successful integration, we have seen improvements in customer service levels and expect consumption data to show improvement in the coming months. Looking to the balance of the year, we expect a strong finish from this business. We remain committed to investing behind the Planters® brands and are excited about our recently introduced Planters® Sweet & Spicy Dry Roasted peanuts and the packaging innovation now in the marketplace. We are also encouraged by the momentum behind the Corn Nuts® brand, which boasts a loyal following and is seeing strong sales gains."

Jennie-O Turkey Store Transformation
"We continued to make progress on our transformative actions at Jennie-O Turkey Store," Snee said. "Our team is navigating the current environment, balancing both short-term opportunities and the long-term vision for our turkey business. Above all, the team remains focused on creating a business model that is better aligned to the changing needs of our customers, consumers and operators to drive long-term, sustainable growth."

During the second quarter, the company closed the Benson Avenue facility and successfully transferred approximately 200 employees to the newer and larger manufacturing facility in Willmar, Minn. One-time plant closure costs were immaterial to segment results. The company remains on track to integrate business functions, consolidate the Jennie-O Turkey Store supply chain into the broader Hormel Foods One Supply Chain, and drive SG&A cost synergies of approximately $20 million to $30 million annually by fiscal 2023.

CHANNEL HIGHLIGHTS – SECOND QUARTER
Demand across the company's U.S. channels remained elevated, as exhibited by strong growth compared to the prior year. The company benefited from pricing actions to offset inflationary pressures across many categories and contributions from the Planters® snack nuts business. Sales for the international channel declined, primarily due to lower commodity exports.






Net Sales Percent Change (%)


Second Quarter 


First Half 

     U.S. Retail


15


16

     U.S. Foodservice


32


41

     International


(3)


(3)

Total


19


21

SEGMENT HIGHLIGHTS – SECOND QUARTER

Refrigerated Foods

  • Volume down 13%; organic volume1 down 14%

  • Net sales up 13%; organic net sales1 up 11%

  • Segment profit up 3%

Net sales increased due to strong results from the foodservice businesses and from retail products such as Columbus® grab-and-go charcuterie, Applegate® natural and organic meats, Hormel® Square TableTM refrigerated entrees and Hormel® Gatherings® party trays. Strategic pricing actions across the portfolio and the inclusion of the Planters® snack nuts business also contributed to growth. Consistent with the company's long-term strategy to better align resources to value-added growth, the overall decline in volume was due primarily to lower commodity sales resulting from the company's new pork supply agreement. Segment profit growth was driven by strong results from the foodservice businesses, more than offsetting higher operational and logistics costs. Volume, sales and segment profit were negatively impacted by production constraints due to labor shortages.

Grocery Products

  • Volume up 19%; organic volume1 up 2%

  • Net sales up 39%; organic net sales1 up 7%

  • Segment profit down 9%

Volume and sales increased due to strength across the portfolio and from the inclusion of the Planters® snack nuts business. Organic sales growth was led by the WHOLLY®, SKIPPY®, SPAM® and Dinty Moore® brands, in addition to strategic pricing actions. Segment profit declined, as organic sales growth and the contribution from the Planters® business were unable to overcome significant inflationary pressures and lower results from MegaMex, which absorbed higher avocado costs. Volume, sales and segment profit were negatively impacted by production constraints due to labor shortages.

Jennie-O Turkey Store

  • Volume down 1%

  • Net sales up 16%

  • Segment profit up 387%

Net sales for all areas of the business increased, led by foodservice, whole bird and retail sales. Value-added volume gains were attributed to strong results from the foodservice business. Higher commodity prices and foodservice sales drove the substantial improvement in segment profit. HPAI had an immaterial direct impact on the segment's results for the quarter.

International & Other

  • Volume down 14%; organic volume1 down 15%

  • Net sales down 1%; organic net sales1 down 3%

  • Segment profit down 3%

Volume and sales declined as a result of current export logistics challenges and lower commodity sales due to the company's new pork supply agreement. Retail sales in China improved as pantry loading and sales to food security programs in response to COVID-related lockdowns helped offset declines in foodservice sales. Profit growth in China was offset by lower results from the export business, which was negatively impacted by logistics challenges and meaningfully higher freight expenses.

SELECTED FINANCIAL DETAILS

  • Advertising spend was $39 million compared to $31 million in the prior year.

  • The effective tax rate was 18.7% compared to 22.1% last year. Higher stock option exercises provided a benefit to the tax rate for the quarter. The effective tax rate for fiscal 2022 is expected to be between 20.5% and 22.5%.

  • Capital expenditures in the second quarter were $78 million compared to $45 million last year. The company's target for capital expenditures in fiscal 2022 is $310 million.

  • Depreciation and amortization expense in the second quarter was $62 million compared to $52 million last year. The full-year expense is expected to be approximately $250 million.

PRESENTATION
A conference call will be webcast at 7 a.m. CDT on Thursday, June 2, 2022. Access is available at www.hormelfoods.com by clicking on "Investors." The call will also be available via telephone by dialing 888-317-6003 and providing the access code 2367917. An audio replay is available by going to www.hormelfoods.com. The webcast replay will be available at noon CDT, Thursday, June 2, 2022, and will remain on the website for one year.

ABOUT HORMEL FOODS - Inspired People. Inspired Food.™
Hormel Foods Corporation, based in Austin, Minn., is a global branded food company with over $11 billion in annual revenue across more than 80 countries worldwide. Its brands include Planters®, SKIPPY®, SPAM®, Hormel® Natural Choice®, Applegate®, Justin's®, WHOLLY®, Hormel® Black Label®, Columbus®, Jennie-O® and more than 30 other beloved brands. The company is a member of the S&P 500 Index and the S&P 500 Dividend Aristocrats, was named on the "Global 2000 World's Best Employers" list by Forbes magazine for three years, is one of Fortune magazine's most admired companies, has appeared on the "100 Best Corporate Citizens" list by 3BL Media 13 times, and has received numerous other awards and accolades for its corporate responsibility and community service efforts. The company lives by its purpose statement — Inspired People. Inspired Food.™ — to bring some of the world's most trusted and iconic brands to tables across the globe. For more information, visit www.hormelfoods.com.

FORWARD-LOOKING STATEMENTS
This news release contains "forward-looking" information within the meaning of the federal securities laws. The "forward-looking" information may include statements concerning the Company's outlook for the future as well as other statements of beliefs, future plans, strategies, or anticipated events and similar expressions concerning matters that are not historical facts. Words or phrases such as "should result," "believe," "intend," "plan," "are expected to," "targeted," "will continue," "will approximate," "is anticipated," "estimate," "project," or similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those anticipated or projected, which factors include, but are not limited to, risks related to the deterioration of economic conditions; the COVID-19 pandemic; risks associated with acquisitions and divestitures; potential disruption of operations including at co-manufacturers, suppliers, logistics providers, customers, or other third-party service providers; risk of loss of a material contract; the Company's inability to protect information technology systems against, or effectively respond to, cyber attacks or security breaches; deterioration of labor relations, labor availability or increases to labor costs; general risks of the food industry, including food contamination; outbreaks of disease among livestock and poultry flocks; fluctuations in commodity prices and availability of raw materials and other inputs; fluctuations in market demand for the Company's products; risks of litigation; potential sanctions and compliance costs arising from government regulation; compliance with stringent environmental regulation and potential environmental litigation; and risks arising from the Company's foreign operations. Please refer to the cautionary statements regarding "Risk Factors" and "Forward-Looking Statements" that appear in our most recent Annual Report on Form 10-K and quarterly reports on Form 10-Q, which can be accessed at hormelfoods.com in the "Investors" section, for additional information. In making these statements, the Company is not undertaking, and specifically declines to undertake, any obligation to address or update each or any factor in future filings or communications regarding the Company's business or results. Though the Company has attempted to list comprehensively these important cautionary risk factors, the Company wishes to caution investors and others that other factors may in the future prove to be important in affecting the Company's business or results of operations. The Company cautions readers not to place undue reliance on forward-looking statements, which represent current views as of the date made.

Note: Due to rounding, numbers presented throughout this news release may not sum precisely to the totals provided, and percentages may not precisely reflect the absolute figures.

1 COMPARISON OF U.S. GAAP TO NON-GAAP FINANCIAL MEASURES
The non-GAAP adjusted financial measures of organic net sales and organic volume are presented to provide investors with additional information to facilitate the comparison of past and present operations. Organic net sales and organic volume are defined as net sales and volume, excluding the impact of acquisitions and divestitures. Organic net sales and organic volume exclude the impact of the acquisition of the Planters® snack nuts business (June 2021) in the Grocery Products, Refrigerated Foods, and International & Other segments.

The company believes these non-GAAP financial measures provide useful information to investors, because they are the measures used to evaluate performance on a comparable year-over-year basis. Non-GAAP measures are not intended to be a substitute for U.S. GAAP measures in analyzing financial performance. These non-GAAP measures are not in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies.

The tables below show the calculations to reconcile from the GAAP measures to the non-GAAP adjusted measures.

RECONCILIATION OF NON-GAAP MEASURES










ORGANIC VOLUME AND NET SALES (NON-GAAP)












Quarter Ended

in thousands


May 1, 2022


April 25, 2021



Volume (lbs.)


Reported

GAAP

Acquisitions

Organic

(Non-GAAP)


Reported

GAAP


Non-GAAP

% Change

     Grocery Products


373,163

(54,150)

319,013


313,795


1.7

     Refrigerated Foods


517,477

(9,608)

507,869


593,271


(14.4)

     Jennie-O Turkey Store


201,608

201,608


202,624


(0.5)

     International & Other


71,949

(1,220)

70,730


83,257


(15.0)

Total


1,164,198

(64,978)

1,099,220


1,192,948


(7.9)










Net Sales









     Grocery Products


$         873,572

$        (200,775)

$         672,797


$         628,232


7.1

     Refrigerated Foods


1,644,284

(34,759)

1,609,525


1,453,380


10.7

     Jennie-O Turkey Store


407,287

407,287


351,179


16.0

     International & Other


171,416

(3,480)

167,935


173,830


(3.4)

Total


$      3,096,559

$        (239,014)

$      2,857,545


$      2,606,621


9.6





















Six Months Ended



May 1, 2022


April 25, 2021



Volume (lbs.)


Reported

GAAP

Acquisitions

Organic

(Non-GAAP)


Reported

GAAP


Non-GAAP

% Change

     Grocery Products


744,678

(117,362)

627,316


618,129


1.5

     Refrigerated Foods


1,090,229

(18,182)

1,072,047


1,188,586


(9.8)

     Jennie-O Turkey Store


390,108

390,108


396,193


(1.5)

     International & Other


144,056

(2,942)

141,114


169,746


(16.9)

Total


2,369,070

(138,485)

2,230,585


2,372,654


(6.0)










Net Sales









     Grocery Products


$      1,729,163

$        (436,507)

$      1,292,656


$      1,205,831


7.2

     Refrigerated Foods


3,271,812

(66,012)

3,205,800


2,820,457


13.7

     Jennie-O Turkey Store


791,759

791,759


684,500


15.7

     International & Other


348,184

(8,320)

339,864


356,980


(4.8)

Total


$      6,140,917

$        (510,838)

$      5,630,079


$      5,067,768


11.1

 

 

HORMEL FOODS CORPORATION

SEGMENT DATA

In thousands

Unaudited








Quarter Ended



May 1, 2022


April 25, 2021


% Change

Net Sales







     Grocery Products


$         873,572


$         628,232


39.1

     Refrigerated Foods


1,644,284


1,453,380


13.1

     Jennie-O Turkey Store


407,287


351,179


16.0

     International & Other


171,416


173,830


(1.4)

Total


$      3,096,559


$      2,606,621


18.8








Segment Profit







     Grocery Products


$           89,299


$           97,970


(8.9)

     Refrigerated Foods


178,492


173,352


3.0

     Jennie-O Turkey Store


61,799


12,700


386.6

     International & Other


23,653


24,481


(3.4)

Total Segment Profit


353,243


308,503


14.5

     Net Unallocated Expense


31,436


15,904


97.7

     Noncontrolling Interest


62


21


197.7

Earnings Before Income Taxes


$         321,868


$         292,620


10.0










Six Months Ended



May 1, 2022


April 25, 2021


% Change

Net Sales







     Grocery Products


$      1,729,163


$      1,205,831


43.4

     Refrigerated Foods


3,271,812


2,820,457


16.0

     Jennie-O Turkey Store


791,759


684,500


15.7

     International & Other


348,184


356,980


(2.5)

Total


$      6,140,917


$      5,067,768


21.2








Segment Profit







     Grocery Products


$         188,785


$         190,172


(0.7)

     Refrigerated Foods


340,884


314,524


8.4

     Jennie-O Turkey Store


105,536


39,640


166.2

     International & Other


49,737


56,685


(12.3)

Total Segment Profit


684,941


601,020


14.0

     Net Unallocated Expense


54,370


31,451


72.9

     Noncontrolling Interest


201


133


51.2

Earnings Before Income Taxes


$         630,772


$         569,702


10.7








 

HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
In thousands, except per share amounts
Unaudited













Quarter Ended


Six Months Ended




May 1,
2022


April 25,
2021


May 1,
2022


April 25,
2021


     Net Sales


$ 3,096,559


$ 2,606,621


$ 6,140,917


$ 5,067,768


     Cost of Products Sold


2,543,088


2,130,314


5,048,697


4,141,291


Gross Profit


553,471


476,307


1,092,220


926,477


     Selling, General and Administrative


224,659


199,966


450,631


396,346


     Equity in Earnings of Affiliates


5,916


13,074


12,814


27,302


Operating Income


334,728


289,415


654,402


557,433


     Interest and Investment Income


1,799


10,992


5,668


28,284


     Interest Expense


14,658


7,788


29,298


16,015


Earnings Before Income Taxes


321,868


292,620


630,772


569,702


     Provision for Income Taxes


60,189


64,699


129,383


119,386


          Effective Tax Rate


18.7%


22.1%


20.5%


21.0%


Net Earnings


261,679


227,921


501,389


450,316


     Less: Net Earnings (Loss) Attributable to
          Noncontrolling Interest


62


21


201


133


Net Earnings Attributable to Hormel Foods
Corporation


$  261,617


$  227,901


$  501,188


$  450,184












Net Earnings Per Share










     Basic


$         0.48


$         0.42


$         0.92


$         0.83


     Diluted


$         0.48


$         0.42


$         0.91


$         0.82












Weighted-average Shares Outstanding










     Basic


544,702


540,195


543,691


540,054


     Diluted


550,036


547,536


548,982


547,490












Dividends Declared per Share


$    0.2600


$    0.2450


$    0.5200


$    0.4900


 

HORMEL FOODS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
In thousands
Unaudited








May 1, 2022


October 31, 2021

Assets

     Cash and Cash Equivalents


$              861,719


$              613,530

     Short-term Marketable Securities


23,478


21,162

     Accounts Receivable


795,292


895,719

     Inventories


1,597,001


1,369,198

     Taxes Receivable


7,763


8,293

     Prepaid Expenses and Other Current Assets


88,304


39,914

Total Current Assets


3,373,557


2,947,816






     Goodwill


4,935,832


4,929,102

     Other Intangibles


1,814,501


1,822,273

     Pension Assets


303,803


289,096

     Investments In and Receivables from Affiliates


275,849


299,019

     Other Assets


295,127


299,907

     Net Property, Plant and Equipment


2,123,595


2,109,117

Total Assets


$         13,122,263


$         12,696,329











Liabilities and Shareholders' Investment

     Accounts Payable and Accrued Expenses


$              826,729


$              844,502

     Accrued Marketing Expenses


126,077


114,746

     Employee Related Expenses


244,664


269,327

     Taxes Payable


93,324


23,520

     Interest and Dividends Payable


181,782


154,803

     Current Maturities of Long-term Debt


8,084


8,756

Total Current Liabilities


1,480,659


1,415,654






     Long-term Debt Less Current Maturities


3,294,101


3,315,147

     Pension and Post-retirement Benefits


550,047


546,362

     Other Long-term Liabilities


160,401


162,623

     Deferred Income Taxes


291,841


278,183

     Accumulated Other Comprehensive Loss


(221,164)


(277,269)

     Other Shareholders' Investment


7,566,378


7,255,630

Total Liabilities and Shareholders' Investment


$         13,122,263


$         12,696,329

 

HORMEL FOODS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands
Unaudited




Quarter Ended


Six Months Ended



May 1,
2022


April 25,
2021


May 1,
2022


April 25,
2021

Operating Activities









     Net Earnings


$    261,679


$    227,921


$    501,389


$    450,316

     Depreciation and Amortization


62,156


52,263


126,436


103,307

     Decrease (Increase) in Working Capital


(154,867)


(127,799)


(100,483)


(190,384)

     Other


24,385


3,189


49,769


(1,979)

       Net Cash Provided by (Used in) Operating
          Activities


193,355


155,573


577,111


361,259










Investing Activities









     Net (Purchase) Sale of Securities


(2,756)


(516)


(4,367)


(722)

     Net Purchases of Property and Equipment


(78,420)


(44,989)


(127,779)


(83,891)

     Other


5,045


(2,450)


6,336


(2,643)

       Net Cash Provided by (Used in) Investing
          Activities


(76,131)


(47,955)


(125,811)


(87,256)










Financing Activities









     Repayments of Long-term Debt and Finance
        Leases


(2,861)


(252,194)


(5,024)


(254,360)

     Dividends Paid on Common Stock


(141,155)


(132,271)


(274,063)


(257,787)

     Share Repurchase



(816)



(9,653)

     Other


64,034


11,575


75,086


13,340

       Net Cash Provided by (Used in) Financing
          Activities


(79,982)


(373,706)


(204,001)


(508,459)

     Effect of Exchange Rate Changes on Cash


44


(920)


890


4,680

       Increase (Decrease) in Cash and Cash
          Equivalents


37,285


(267,008)


248,189


(229,776)

     Cash and Cash Equivalents at Beginning of
        Year


824,434


1,751,541


613,530


1,714,309

        Cash and Cash Equivalents at End of
           Quarter


$    861,719


$ 1,484,533


$    861,719


$ 1,484,533

 

INVESTOR CONTACT:

MEDIA CONTACT:

David Dahlstrom

Media Relations

(507) 437-5248

(507) 437-5345

ir@hormel.com

media@hormel.com

 

Cision
Cision

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SOURCE Hormel Foods Corporation