AUSTIN, Minn. – Hormel Foods Corp. reported positive quarterly performance from its Refrigerated Foods and Jennie-O Turkey Store business segments, which helped offset financial headwinds faced by its Grocery Products and International segments.
Net income at Hormel Foods Corp. for the first quarter ended Jan. 26, 2020, totaled $242.9 million, equal to $0.45 per share on the common stock, up 0.5 percent from $241.5 million or $0.44 in the same period a year ago. Net sales for the quarter increased 1 percent to $2.38 billion from $2.36 billion.
The company’s acquisition of Henderson, Texas-based Sadler’s Smokehouse for $270 million, was announced Feb. 20, the same day Hormel’s quarterly results were announced.
Companywide volume was down was down 1 percent from the previous year to 1.2 billion lbs., however, organic product volume increased 2 percent. Despite volatility in the commodity markets, Refrigerated Foods segment profit increased 3 percent with volume and net sales up 3 percent and 6 percent, respectively. Increased commodity profits offset higher raw material costs in Hormel’s value-added segments, with its foodservice and retail branded products reflecting growing demand.
Jennie-O Turkey Store’s volume increase of 8 percent and net sales increase of 3 percent contributed to a 2 percent higher segment profit over the previous year. Sales totaled $330.1 million compared to $321.2 million in the same period last year. Profitability was attributed to operational improvements and commodity profit increases.
“It is encouraging to see Jennie-O Turkey Store deliver a second consecutive quarter of volume, sales and profit growth while continuing to gain back Jennie-O lean ground turkey distribution,” said Jim Snee, Hormel’s chairman, president and CEO.
“We are also seeing the strategic capital and marketing investments lead to strong growth from brands such as SPAM, Hormel Black Label, Fontanini, Hormel Bacon and Hormel Bacon and Hormel Fire Braised,” he said.
In its Grocery Products segment, Hormel attributed lagging volume and sales largely to the divestiture of its CytoSport business in early 2019 as well as increased raw material costs, lack of profitability in contract manufacturing and lower volumes. Positive sales in product lines that include Spam and Wholly Guacamole were not enough to offset Skippy product’s declining sales. Grocery Products sales dropped 11 percent in the quarter to $540.6 million from $606.8 million during the same period in 2019. Profit decreased by 28 percent in the segment, to $68.4 million from $95.3 million in the previous year.
The International and Other business segment reported 5 percent higher net sales for the quarter, at $161.9 million over last year’s $153.5 million, but profit plunged by 20 percent, to $19.9 million compared to $24.9 million in 2019, due to animal disease, human illness and trade disputes.
“Our International team continues to manage through African Swine Fever, tariffs and the uncertainty caused by the recent outbreak of coronavirus in China,” Snee said. “We have started to see a negative impact on our business in China from the coronavirus outbreak, but we are not yet able to forecast the impact for the remainder of the year. For the full year, we expect the International results to be offset by strong performances from Refrigerated Foods and Jennie-O Turkey Store.”