‘A Wildcard’: Hormel Lowers Full Year Outlook, Citing Weak International Performance
Hormel Foods today lowered its net sales guidance for the full year to the low single-digit range citing unfavorable pork and turkey commodity markets and weakened demand in China.
At $3 billion, net sales in Q3 were flat compared to the year prior period. Hormel chairman of the board, president and CEO Jim Snee in a prepared statement said the earnings growth in the company’s U.S. business aggregate was “more than offset” by “significantly weaker-than-expected results” in its international segment.
The Austin, Minnesota-based company transitioned to three operating segments last year, seeking to move further beyond meat products and evolve into a global branded food company. The model, put into place at the beginning of the 2023 fiscal year, is centered around a push to make Hormel’s business “more agile, consumer and customer focused and market-driven,” according to a press release.
During the third quarter earnings call today, Snee told investors that the company’s international segment, specifically the macro issues in China, remains a “wild card.” The company expects continued softness in the segment as well as earnings pressure from heightened competition at retail.
“We’ve said earlier that we thought there would be an inflection point and we were wrong. We’re optimistic about what the future holds but clearly, we’ve got some of the short term challenges that we’re addressing,” said Snee.
Competitor Tyson Foods plans to sell its China poultry business, as reported by Reuters earlier this month. During its own Q3 earnings call, the U.S. meat and processed food maker announced it will close four more chicken facilities in order to lower costs and streamline production on the back of slumping sales.
Volume in Hormel’s retail, foodservice and international segments rose 1%, 2% and 10%, respectively during Q3.
According to the company, volume growth in the quarter was driven by a recovery in turkey, a strong demand for foodservice items and growth from its retail brands like SPAM, Hormel, Black Label and Planters. Retail shipments of Planters snack nuts and Corn Nuts were up 5% and 24%, respectively.
“In an increasingly dynamic and competitive environment, we grew volume across all of our segments delivered adjusted net earnings per share in line with last year and made further progress addressing the near-term challenges impacting the business,” said chairman of the board, president and CEO Jim Snee in a prepared statement. “This progress included reducing inventory, building momentum in the Planters snack nuts business and driving adjusted operating margin improvement.”
Looking ahead, the company expects Q4 net sales to be between $3.1 billion and $3.6 billion. Full-year net sales are projected to be 4% to flat, reflecting performance to date and current assumptions of raw material input costs during the fourth quarter.
According to Snee, due to the extreme heat in the Midwest throughout August, the company has lost a number of birds, which will have an impact on Hormel’s business in the fourth quarter. However, the company expects to benefit from expanded distribution of its Applegate brand as well as added capacity for Skippy peanut butter.
