Hormel reports slipping sales in Q3

by Joel Crews
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Jennie-O Turkey products
Hormel Foods' Grocery Products segment offset weak results from Jennie-O Turkey Store.

AUSTIN, Minn. – Hormel Foods Corp. reported results of its fiscal year 2015 third quarter ended July 26, highlighted by increased net earnings of $146.938 million compared to $137.975 million during the same 13 week period this past year. Net sales slipped 4 percent, to $2.188 billion versus $2.284 billion for the same quarter last year. Year-to-date net sales compare favorably in fiscal 2015, at $6.863 billion, compared to $6.772 billion compared to last year, an increase of 1.3 percent.

In announcing its results, the company acknowledged its quarterly revenues were lower due to declining pork markets, which hindered its Refrigerated Foods and International segments. The company also was challenged in the third quarter by loss of sales related to avian influenza, but year-to-date results remain mostly positive.

By business segments, the company’s Jennie-O Turkey Store’s profit dipped 45.4 percent for the quarter, from $64.75 million in fiscal 2014 to $35.37 million during the same period this year, due in large part to the impact of this year’s avian influenza outbreak. Quarterly sales reported for Jennie-O were down 12.1 percent, to $336.533 million compared to $382.647 million last year. Year-to-date net sales in the company’s turkey segment are outpacing the previous year’s by 4.6 percent, at $1.215 billion versus $1.162 billion.

“Our balanced business model prevailed once again this quarter, as we were able to overcome the significant challenge of avian influenza in our Jennie-O Turkey Store segment to deliver record earnings and volume sales,” said Jeffrey Ettinger, chairman of the board, president and CEO.

Hormel’s recent efforts to diversify served to bolster its earnings, thanks in large part to its Grocery Products segment. For the quarter, Grocery Products accounted for $1.195 billion in sales, a 3.6 percent increase over 2014, when sales were $1.153 billion. 

Jeffrey M. Ettinger, chairman and CEO, Hormel Foods
Jeffrey M. Ettinger, president and CEO of Hormel Foods Inc.

“Grocery Products drove earnings growth with favorable input costs and increased sales of Hormel chili and Skippy peanut butter,” Ettinger said.

Hormel’s Specialty Foods segment quarterly profit spiked 79.5 percent to $31.190 million compared to $17.378 million the previous year.

“Specialty Foods also delivered excellent results, as the team continues to increase sales of Muscle Milk protein nutrition products, and improve the cost structure and synergies between our CytoSport and Century Foods businesses,” said Ettinger.

Hormel’s acquisition of Applegate Farms LLC, announced May 26, is another reason for Ettinger’s optimism looking forward.

“I am pleased to welcome the Applegate team to Hormel Foods now that we finalized the acquisition in mid-July,” he noted. “Together we will expand our offerings in the high-growth natural and organic meat category, allowing us to reach even more consumers with the Applegate brand.”

Admitting challenges will continue to face the company, Ettinger said Hormel is well positioned to weather the storm.

“While Jennie-O Turkey Store will continue to show year-over-year declines due to the impact of avian influenza, we are pleased with our team’s ability to navigate this difficult challenge. Our International segment will face headwinds in the pork export markets over the near term. We look for Refrigerated Foods and Grocery Products to continue to drive earnings increases with input cost tailwinds and growth in key value-added products.”

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