Spinoff impact drags on Hillshire Q4 earnings
CHICAGO – The Hillshire Brands Company reported sharply lower income for the fourth quarter as a result of the company's spinoff of its coffee and tea business, however full-year results were stronger.
Net income for the quarter ended June 29 was $41 million, or 33 cents per share, down from $599 million, or $5.02 per share reported in the comparable year ago quarter.
“In this pivotal transition year, we are pleased with the progress we made on our plans to deliver strong and sustainable shareholder returns. This affirms our confidence in the underlying business and enables us to return more cash to shareholders,” said Sean Connolly, president and CEO of Hillshire Brands.
“Our strategy of strengthening our core brands through increased MAP and innovation worked well as our strong businesses became stronger and we made progress on our challenged businesses. We also achieved our fiscal 2013 savings targets and identified additional efficiency initiatives. We recognize our work is not done, and we will continue our efforts to strengthen our portfolio,” he added.
“As we look to fiscal 2014, we expect performance to gain momentum through the year. First half results will reflect lapping of fiscal 2013 favorability, near-term inflation, and competitive dynamics. Second half performance will be fueled by a robust innovation slate and the benefit of our cost savings programs. As we exit fiscal 2014, our company will be significantly stronger versus where we started, delivering solid growth and well-positioned for fiscal 2015.”
Full-year results were above guidance range, according to the company. For fiscal year 2013 Hillshire recorded adjusted and reported net sales of $3,920 million, up 0.4 percent and down 1.0 percent, respectively, compared to a year ago. Adjusted operating income gained 12.5 percent to $363 million. Lower input costs and efficiencies were partially reinvested in marketing and promotions, according to the company.
Reported operating income increased 290.7 percent to $297 million. Adjusted earnings per share increased 18.6 percent to $1.72, and reported earnings per share increased to $1.49 from a loss a year ago.
Net sales in the Retail segment declined 3.8 percent in the fourth quarter. Operating income in the segment fell 32.3 percent. The company attributed the results to sales decline and investments in brand building and innovation. For fiscal year 2013, sales climbed 0.3 percent with Jimmy Dean, Ball Park, Aidells and Gallo showing growth behind increased spending for marketing and promotions, according to the company. Operating income for the full year gained 5.5 percent.
“Jimmy Dean, which has performed well all year, had another strong quarter, growing both volume and sales behind increased MAP and innovation,” the company said. “Breakfast sandwiches continued their strong growth driven, in particular, by Jimmy Dean Delights.
“The Ball Park brand also had a good quarter, growing share in hot dogs and delivering continued growth in flame grilled patties. Additionally, Aidells continued to grow behind successful new product launches, including multiple varieties of chicken meatballs.”
The company also addressed problems with the new lunchmeat package for Hillshire Farms. The company said customer service returned to normal levels and promotional activities have resumed.
Net sales in the Foodservice segment increased 2.7 percent on double-digit growth in convenience stores and high-end desserts. Commodity turkey sales also lifted sales in the quarter. Operating income fell 13.5 percent.