Hormel remains positive about grocery business

by Monica Watrous
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Hormel  
Hormel saw strong sales of SPAM, Skippy, Wholly Guacamole and Justin's specialty nut butter. 
 

AUSTIN, Minn. – Hormel Foods Corp. delivered record sales and earnings in the recent quarter, but the company’s grocery business remains “a mixed bag,” said James P. Snee, president and COO. Segment profit was flat, as strong sales of SPAM, Skippy and Wholly Guacamole and the addition of Justin’s specialty nut butters were offset by increased advertising expenses, acquisition costs and weakness elsewhere in the packaged foods portfolio.

Overall, net earnings attributable to Hormel Foods Corp. in the third quarter ended July 24 were $195,654,000, equal to 37 cents per share on the common stock, up 33 percent from $146,938,000, or 28 cents per share, in the prior-year period. Net sales advanced 5 percent to $2,302,376,000 from $2,188,587,000.

Looking ahead, Snee said the company feels positive about the grocery business going forward.

 Jim
James P. Snee, president and COO of Hormel 

“From a sales perspective or brand perspective, clearly very pleased with the work the team did on continuing to grow the SPAM franchise,” he said during an Aug. 18 earnings call with financial analysts. “The Skippy business, the introduction of Skippy P.B. bites continues to go well. Our Mexican foods portfolio also continues to perform well.

“As we mentioned, we did have some increased advertising cost, but that’s, from our perspective, a positive to support the ongoing and future brand growth. And there’s no doubt, we have a couple areas in the unit that are work in process. The chunk meats category, which is not a huge part of the portfolio, but that’s become competitive, and our team is working on really taking a different approach with the product offerings that we have there. Again, we talked about Compleats being down, and we’re working very strategically to expand the availability of some of the value tier offerings and really increasing the sales or unit rates.”

For the second quarter, Grocery Products operating profit was flat at $53,344,000, with volume up 1 percent and dollar sales up 3 percent at $388,094,000.

 Hormel
Hormel Compleats sales were down during the quarter. 
 

“Our Grocery Products team continues to deliver exciting and innovative new products, such as Skippy P.B. Bites and Herdez Guacamole Salsa,” Snee said. “Both recently introduced products are exceeding our expectations in the marketplace.”

Refrigerated Foods operating profit increased 24 percent to $120,702,000, with volume up 3 percent and dollar sales up 9 percent at $1,155,297,000, benefitting from the addition of the Applegate business, favorable market conditions and strong results from the food service business.

Jennie-O Turkey Store operating profit climbed 59 percent to $56,147,000, with volume up 29 percent and dollar sales up 20 percent at $403,953,000, as production volumes returned to normalized levels during the quarter, enabling food service and deli to deliver volume, sales and margin gains.

 JennieO
Jennie-O Turkey Store operating profity climbing 59 percent to $56,147,000
 

Specialty Foods operating profit declined 13 percent to $27,089,000, with volume down 32 percent and dollar sales down 25 percent at $212,197,000, reflecting the impact of the divestiture of the Diamond Crystal Brands business. International and Other operating profit rose 5 percent to $131,587,000, with volume up 10 percent and dollar sales up 5 percent at $20,308,000, reflecting solid exports of fresh pork, Skippy and SPAM.

“As a result of a strong third-quarter performance, one-time gains from various discrete tax events, and continued confidence in our business, we are raising our full-year guidance from $1.56 to $1.60 per share to $1.60 to $1.64 per share,” Snee said. “And our early look into (fiscal year 2017) shows us once again growing sales and earnings.” 

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