Hormel Foods missed earnings expectations in its most recent quarter, as its Jennie-O turkey business weighed on its operations.
In its quarterly earnings call Wednesday, CEO Jim Snee said Hormel expects further pressure in the next year due to the uncertain picture for its turkey segment following the resurgence of highly pathogenic avian influenza in U.S. poultry flocks this fall.
“We are closely monitoring sell-through of whole turkeys this holiday season, as well as any potential supply impacts from HPAI, which has again affected flocks this fall,” Snee said. “These are very unusual market dynamics which has added additional risk and uncertainty to our outlook.”
In March, Hormel said its turkey volumes decreased by 80% year-over-year that quarter as the virus ravaged its flocks. While the company does not currently anticipate that its supply of turkey will face the same impact in 2024, its economic outlook focuses on the potential for more bird flu in its supply chain.
Turkey volumes improved as producers repopulated their flocks, but prices remain higher than before the last bird flu wave. Turkey prices were 7.2% higher year-over-year in October, according to the U.S. Bureau of Labor Statistics’ most recent Consumer Price Index.
Snee also said the company plans to invest $250 million during the next three years to modernize its operations through manufacturing and tech upgrades. The company’s net sales fell 4% and volumes decreased 3% in the quarter, according to its earnings report, with profits 40%.
With inflation a looming concern for many, consumers are pulling back spending on food items, a dynamic that’s weighing on food companies who can’t continue to raise prices and expect sales to increase.
Deanna Brady, the executive vice president of Hormel’s retail division, said the company plans to be more proactive about its pricing decisions as consumer behavior evolves than it was when it began raising prices after the pandemic.
“It's important that we take those elasticities very seriously because they are moving, and moving pretty quickly,” Brady said.