Company delivers volume growth in each segment and makes further progress on key initiatives
AUSTIN, Minn., Aug. 31, 2023 /PRNewswire/ -- Hormel Foods Corporation (NYSE: HRL), a Fortune 500 global branded food company, today reported results for the third quarter of fiscal 2023. All comparisons are to the third quarter of fiscal 2022 unless otherwise noted.
EXECUTIVE SUMMARY — THIRD QUARTER
EXECUTIVE COMMENTARY & OUTLOOK"Our third quarter results reflect the strength of our leading brands, the value of our balanced business model and our team's commitment to improving our performance," said Jim Snee, chairman of the board, president and chief executive officer. "In an increasingly dynamic and competitive environment, we grew volume across all our segments, delivered adjusted net earnings per share1 in line with last year and made further progress addressing the near-term challenges impacting the business. This progress included reducing inventory, building momentum in the Planters® snack nuts business and driving adjusted operating margin1 improvement compared to last year."
"The investments into our brands and continued improvement across our supply chain have generated positive performance in the marketplace," Snee said. "Volume growth for the quarter was broad based, driven by a recovery in turkey, strong demand for many of our foodservice items and growth from leading retail brands, including SPAM®, Hormel® Black Label®, Planters® and Hormel® pepperoni. Our Foodservice segment delivered another quarter of strong bottom-line growth, and the Retail segment delivered margins ahead of our expectations. Earnings growth from our U.S. businesses in aggregate was more than offset by significantly weaker-than-expected results in our International segment, supply chain disruption caused by a third-party logistics provider shutdown and an adverse arbitration ruling."
"We remain focused on driving volume and earnings growth, as well as delivering on our commitments to improve our business," Snee said. "The operating environment domestically and abroad continues to be dynamic, and we anticipate consumers and operators to remain highly intentional in their spending. As we close the year, we expect a strong finish from our Foodservice segment, incremental savings from a series of projects aimed at reducing costs and complexity throughout our system, and further synergies from our implementation of GoFWD. Additionally, we expect continued softness in our International segment and earnings pressure from heightened competition at retail. Our continued investments into our brands, disciplined financial strategy and balanced approach across our businesses position us well for future growth as we close a challenging 2023."
For the balance of the year, the Company expects:
UPDATE ON STRATEGIC PRIORITIES Protect & grow our core brands
Amplify scale in snacking & entertaining
Enhance growth of our ethnic & Food Forward portfolios
Expand leadership in foodservice
Aggressively develop our global presence
Continue to transform our company
SEGMENT HIGHLIGHTS – THIRD QUARTER
Retail
Volume growth was driven by the value-added meats, bacon, snacking and entertaining, and emerging brands verticals. In addition to a recovery across the turkey portfolio, volume and net sales grew for many items, including our SPAM® family of products, Hormel® Gatherings® party trays, Hormel® pepperoni and Applegate® natural and organic meats. Net sales declined due to the difficult comparison from high levels of demand for Skippy® spreads last year and lower market-driven pricing on raw bacon items. Segment profit declined due to unfavorable mix and increased brand investments, partially offset by the benefit from pricing actions across the portfolio, improved bacon volumes and higher equity in earnings from MegaMex Foods.
Foodservice
Volume for the quarter increased, driven by growth in our affiliated businesses and strong demand in many branded categories, including pizza toppings, premium bacon and breakfast sausage, and premium prepared proteins. Brands such as Cafe H®, Hormel® Fire Braised™, Fontanini®, Old Smokehouse® and Hormel®Bacon 1™ delivered volume gains compared to the prior year. Net sales declined, primarily due to lower net pricing in certain categories, such as bacon, reflecting raw material commodity deflation. Segment profit increased due to the contribution from higher volumes and improved mix.
International
Net sales declined as a result of lower branded export sales and lower results in China. Foodservice sales in China improved sequentially throughout the third quarter, partially offsetting the difficult net sales comparison from sales to food-security programs last year. In addition to growth from the Skippy® and Planters® brands, strong volume growth was driven by low-margin commodity fresh pork and turkey exports. Segment profit declined significantly due to unfavorable pork and turkey commodity markets, continued softness in China and lower branded export demand.
SELECTED FINANCIAL DETAILS
PRESENTATIONA conference call will be webcast at 8 a.m. CT on Aug. 31, 2023. Access is available at www.hormelfoods.com by clicking on "Investors." The call will also be available via telephone by dialing 888-259-6580 (toll-free) or 416-764-8624 (international). An audio replay is available by going to www.hormelfoods.com. The webcast replay will be available at noon CT, Aug. 31, 2023, and will remain on the website for one year.
ABOUT HORMEL FOODS - Inspired People. Inspired Food.™Hormel Foods Corporation, based in Austin, Minn., is a global branded food company with over $12 billion in annual revenue across more than 80 countries worldwide. Its brands include Planters®, Skippy®, SPAM®, Hormel® Natural Choice®, Applegate®, Justin's®, Wholly®, Hormel® Black Label®, Columbus®, Jennie-O® and more than 30 other beloved brands. The Company is a member of the S&P 500 Index and the S&P 500 Dividend Aristocrats, was named on the "Global 2000 World's Best Employers" list by Forbes magazine for three years, is one of Fortune magazine's most admired companies, has appeared on the "100 Best Corporate Citizens" list by 3BL Media 13 times, and has received numerous other awards and accolades for its corporate responsibility and community service efforts. The Company lives by its purpose statement — Inspired People. Inspired Food.™ — to bring some of the world's most trusted and iconic brands to tables across the globe. For more information, visit www.hormelfoods.com.
FORWARD-LOOKING STATEMENTSThis news release contains "forward-looking" information within the meaning of the federal securities laws. The "forward-looking" information may include statements concerning the Company's outlook for the future as well as other statements of beliefs, future plans, strategies, or anticipated events and similar expressions concerning matters that are not historical facts. Words or phrases such as "should result," "believe," "intend," "plan," "are expected to," "targeted," "will continue," "will approximate," "is anticipated," "estimate," "project," or similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those anticipated or projected, which factors include, but are not limited to, risks related to the deterioration of economic conditions; the COVID-19 pandemic; risks associated with acquisitions and divestitures; potential disruption of operations including at co-manufacturers, suppliers, logistics providers, customers, or other third-party service providers; risk of loss of a material contract; the Company's inability to protect information technology systems against, or effectively respond to, cyber attacks or security breaches; deterioration of labor relations, labor availability or increases to labor costs; general risks of the food industry, including food contamination; outbreaks of disease among livestock and poultry flocks; fluctuations in commodity prices and availability of raw materials and other inputs; fluctuations in market demand for the Company's products; damage to the Company's reputation or brand image; climate change, or legal, regulatory, or market measures to address climate change; risks of litigation; potential sanctions and compliance costs arising from government regulation; compliance with stringent environmental regulations and potential environmental litigation; and risks arising from the Company's foreign operations. Please refer to the cautionary statements regarding "Risk Factors" and "Forward-Looking Statements" that appear in our most recent Annual Report on Form 10-K and Quarterly reports on Form 10-Q, which can be accessed at www.hormelfoods.com in the "Investors" section, for additional information. In making these statements, the Company is not undertaking, and specifically declines to undertake, any obligation to address or update each or any factor in future filings or communications regarding the Company's business or results, and is not undertaking to address how any of these factors may have caused changes to discussions or information contained in previous filings or communications. Though the Company has attempted to list comprehensively these important cautionary risk factors, the Company wishes to caution investors and others that other factors may in the future prove to be important in affecting the Company's business or results of operations. The Company cautions readers not to place undue reliance on forward-looking statements, which represent current views as of the date made.
Note: Due to rounding, numbers presented throughout this news release may not sum precisely to the totals provided, and percentages may not precisely reflect the absolute figures.
1 COMPARISON OF U.S. GAAP TO NON-GAAP FINANCIAL MEASURESThe non-GAAP adjusted financial measures of adjusted operating income, adjusted operating margin, adjusted earnings before income taxes, and adjusted diluted net earnings per share are presented to provide investors with additional information to facilitate the comparison of past and present operations. Adjusted operating income, adjusted operating margin, adjusted earnings before income taxes and adjusted diluted net earnings per share exclude the impact of an adverse arbitration ruling. The tax impact was calculated using the effective tax rate for the quarter in which the expense was incurred.
The Company believes these non-GAAP financial measures provide useful information to investors because they are the measures used to evaluate performance on a comparable year-over-year basis. Non-GAAP measures are not intended to be a substitute for GAAP measures in analyzing financial performance. These non-GAAP measures are not in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies.
The tables below show the calculations to reconcile from the GAAP measures to the non-GAAP adjusted measures.
HORMEL FOODS CORPORATION | |||||||
RECONCILIATION OF NON-GAAP MEASURES | |||||||
In thousands, except per share amounts | |||||||
Unaudited | |||||||
Quarter Ended | |||||||
July 30, 2023 | July 31, 2022 | ||||||
GAAP | Arbitration Ruling | Non-GAAP | Reported GAAP | Non-GAAP % Change | |||
Net Sales | $ 2,963,299 | $ — | $ 2,963,299 | $ 3,034,414 | (2.3) | ||
Cost of Products Sold | 2,465,251 | — | 2,465,251 | 2,528,364 | (2.5) | ||
Gross Profit | 498,048 | — | 498,048 | 506,049 | (1.6) | ||
Selling, General, and Administrative | 291,073 | (70,000) | 221,073 | 222,147 | (0.5) | ||
Equity in Earnings of Affiliates | 9,784 | — | 9,784 | 7,138 | 37.1 | ||
Operating Income | 216,759 | 70,000 | 286,759 | 291,040 | (1.5) | ||
Interest and Investment Income | 9,239 | — | 9,239 | 14,411 | (35.9) | ||
Interest Expense | 18,372 | — | 18,372 | 15,615 | 17.7 | ||
Earnings Before Income Taxes | 207,626 | 70,000 | 277,626 | 289,836 | (4.2) | ||
Provision for Income Taxes | 45,055 | 15,190 | 60,245 | 71,010 | (15.2) | ||
Net Earnings | 162,571 | 54,810 | 217,381 | 218,826 | (0.7) | ||
Less: Net Earnings (Loss) Attributable to Noncontrolling Interest | (108) | — | (108) | (89) | (21.4) | ||
Net Earnings Attributable to HormelFoods Corporation | $ 162,679 | $ 54,810 | $ 217,489 | $ 218,915 | (0.7) | ||
Diluted Net Earnings Per Share | $ 0.30 | $ 0.10 | $ 0.40 | $ 0.40 | — | ||
Operating Margin (% of Net Sales) | 7.3 | 9.7 | 9.6 | ||||
Nine Months Ended | |||||||
July 30, 2023 | July 31, 2022 | ||||||
GAAP | Arbitration Ruling | Non-GAAP | Reported GAAP | Non-GAAP % Change | |||
Net Sales | $ 8,911,930 | $ — | $ 8,911,930 | $ 9,175,331 | (2.9) | ||
Cost of Products Sold | 7,426,514 | — | 7,426,514 | 7,577,062 | (2.0) | ||
Gross Profit | 1,485,417 | — | 1,485,417 | 1,598,269 | (7.1) | ||
Selling, General, and Administrative | 725,621 | (70,000) | 655,621 | 672,777 | (2.6) | ||
Equity in Earnings of Affiliates | 42,213 | — | 42,213 | 19,951 | 111.6 | ||
Operating Income | 802,009 | 70,000 | 872,009 | 945,443 | (7.8) | ||
Interest and Investment Income | 20,700 | — | 20,700 | 20,078 | 3.1 | ||
Interest Expense | 55,042 | — | 55,042 | 44,913 | 22.6 | ||
Earnings Before Income Taxes | 767,666 | 70,000 | 837,666 | 920,608 | (9.0) | ||
Provision for Income Taxes | 170,230 | 15,190 | 185,420 | 200,393 | (7.5) | ||
Net Earnings | 597,437 | 54,810 | 652,247 | 720,215 | (9.4) | ||
Less: Net Earnings (Loss) Attributable toNoncontrolling Interest | (200) | — | (200) | 112 | (279.1) | ||
Net Earnings Attributable to Hormel Foods Corporation | $ 597,637 | $ 54,810 | $ 652,447 | $ 720,103 | (9.4) | ||
Diluted Net Earnings Per Share | $ 1.09 | $ 0.10 | $ 1.19 | $ 1.31 | (9.2) | ||
Operating Margin (% of Net Sales) | 9.0 | 9.8 | 10.3 |
END NOTES2Circana Total US MULO;13 weeks ended 7/16/2023 vs YAG3Circana Scan Panel; Total US All Outlet; 52 weeks ended 7/16/2023 vs YAG4Circana Scan Panel; Total US All Outlet; 13 weeks ended 7/16/2023 vs YAG5Circana Scan Panel; Total US All Outlet; 4 weeks ended 7/26/23 vs YAG6Nielsen; Total US xAOC; dollar sales for 12 weeks ended 7/29/2023 vs YAG7Internal data8Euromonitor – December 2021, Germany9Retailer POS aggregated online sales - total Hormel, 12 weeks ended 07/30/2023
HORMEL FOODS CORPORATION SEGMENT DATA In thousands Unaudited | ||||||
Quarter Ended | ||||||
July 30, 2023 | July 31, 2022 | % Change | ||||
Volume (lbs.) | ||||||
Retail | 748,146 | 742,103 | 0.8 | |||
Foodservice | 255,822 | 250,513 | 2.1 | |||
International | 90,550 | 81,993 | 10.4 | |||
Total | 1,094,518 | 1,074,609 | 1.9 | |||
Net Sales | ||||||
Retail | $ 1,891,746 | $ 1,924,553 | (1.7) | |||
Foodservice | 890,949 | 917,671 | (2.9) | |||
International | 180,605 | 192,190 | (6.0) | |||
Total | $ 2,963,299 | $ 3,034,414 | (2.3) | |||
Segment Profit | ||||||
Retail | $ 151,128 | $ 163,092 | (7.3) | |||
Foodservice | 146,270 | 128,798 | 13.6 | |||
International | 12,222 | 24,464 | (50.0) | |||
Total Segment Profit | 309,619 | 316,354 | (2.1) | |||
Net Unallocated Expense | 101,886 | 26,429 | 285.5 | |||
Noncontrolling Interest | (108) | (89) | (21.4) | |||
Earnings Before Income Taxes | $ 207,626 | $ 289,836 | (28.4) | |||
Nine Months Ended | ||||||
July 30, 2023 | July 31, 2022 | % Change | ||||
Volume (lbs.) | ||||||
Retail | 2,267,363 | 2,435,581 | (6.9) | |||
Foodservice | 747,484 | 760,677 | (1.7) | |||
International | 241,445 | 247,421 | (2.4) | |||
Total | 3,256,292 | 3,443,679 | (5.4) | |||
Net Sales | ||||||
Retail | $ 5,765,786 | $ 5,921,145 | (2.6) | |||
Foodservice | 2,607,140 | 2,681,737 | (2.8) | |||
International | 539,005 | 572,450 | (5.8) | |||
Total | $ 8,911,930 | $ 9,175,331 | (2.9) | |||
Segment Profit | ||||||
Retail | $ 459,031 | $ 522,980 | (12.2) | |||
Foodservice | 428,110 | 399,482 | 7.2 | |||
International | 45,723 | 78,833 | (42.0) | |||
Total Segment Profit | 932,863 | 1,001,295 | (6.8) | |||
Net Unallocated Expense | 164,997 | 80,799 | 104.2 | |||
Noncontrolling Interest | (200) | 112 | (279.1) | |||
Earnings Before Income Taxes | $ 767,666 | $ 920,608 | (16.6) | |||
HORMEL FOODS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS In thousands, except per share amounts Unaudited | ||||||||
Quarter Ended | Nine Months Ended | |||||||
July 30, 2023 | July 31, 2022 | July 30, 2023 | July 31, 2022 | |||||
Net Sales | $ 2,963,299 | $ 3,034,414 | $ 8,911,930 | $ 9,175,331 | ||||
Cost of Products Sold | 2,465,251 | 2,528,364 | 7,426,514 | 7,577,062 | ||||
Gross Profit | 498,048 | 506,049 | 1,485,417 | 1,598,269 | ||||
Selling, General, and Administrative | 291,073 | 222,147 | 725,621 | 672,777 | ||||
Equity in Earnings of Affiliates | 9,784 | 7,138 | 42,213 | 19,951 | ||||
Operating Income | 216,759 | 291,040 | 802,009 | 945,443 | ||||
Interest and Investment Income | 9,239 | 14,411 | 20,700 | 20,078 | ||||
Interest Expense | 18,372 | 15,615 | 55,042 | 44,913 | ||||
Earnings Before Income Taxes | 207,626 | 289,836 | 767,666 | 920,608 | ||||
Provision for Income Taxes | 45,055 | 71,010 | 170,230 | 200,393 | ||||
Effective Tax Rate | 21.7 % | 24.5 % | 22.2 % | 21.8 % | ||||
Net Earnings | 162,571 | 218,826 | 597,437 | 720,215 | ||||
Less: Net Earnings (Loss) Attributable to Noncontrolling Interest | (108) | (89) | (200) | 112 | ||||
Net Earnings Attributable to Hormel Foods Corporation | $ 162,679 | $ 218,915 | $ 597,637 | $ 720,103 | ||||
Net Earnings Per Share: | ||||||||
Basic | $ 0.30 | $ 0.40 | $ 1.09 | $ 1.32 | ||||
Diluted | $ 0.30 | $ 0.40 | $ 1.09 | $ 1.31 | ||||
Weighted-average Shares Outstanding: | ||||||||
Basic | 546,358 | 546,077 | 546,389 | 544,486 | ||||
Diluted | 548,637 | 550,167 | 549,227 | 549,377 | ||||
Dividends Declared Per Share | $ 0.2750 | $ 0.2600 | $ 0.8250 | $ 0.7800 | ||||
HORMEL FOODS CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION In thousands Unaudited | ||||
July 30,2023 | October 30,2022 | |||
Assets | ||||
Cash and Cash Equivalents | $ 669,124 | $ 982,107 | ||
Short-term Marketable Securities | 17,423 | 16,149 | ||
Accounts Receivable | 786,246 | 867,593 | ||
Inventories | 1,737,865 | 1,716,059 | ||
Taxes Receivable | 7,498 | 7,177 | ||
Prepaid Expenses and Other Current Assets | 36,613 | 48,041 | ||
Total Current Assets | 3,254,770 | 3,637,125 | ||
Goodwill | 4,931,590 | 4,925,829 | ||
Other Intangibles | 1,790,761 | 1,803,027 | ||
Pension Assets | 235,943 | 245,566 | ||
Investments in Affiliates | 743,474 | 271,058 | ||
Other Assets | 338,741 | 283,169 | ||
Net Property, Plant, and Equipment | 2,131,479 | 2,141,146 | ||
Total Assets | $ 13,426,757 | $ 13,306,919 | ||
Liabilities and Shareholders' Investment | ||||
Accounts Payable | $ 703,407 | $ 816,604 | ||
Accrued Expenses | 119,464 | 58,801 | ||
Accrued Marketing Expenses | 100,974 | 113,105 | ||
Employee Related Expenses | 241,879 | 279,072 | ||
Interest and Dividends Payable | 158,335 | 163,963 | ||
Taxes Payable | 49,583 | 32,925 | ||
Current Maturities of Long-term Debt | 946,981 | 8,796 | ||
Total Current Liabilities | 2,320,622 | 1,473,266 | ||
Long-term Debt Less Current Maturities | 2,360,380 | 3,290,549 | ||
Pension and Post-retirement Benefits | 396,297 | 385,832 | ||
Deferred Income Taxes | 467,827 | 475,212 | ||
Other Long-term Liabilities | 163,768 | 141,840 | ||
Accumulated Other Comprehensive Loss | (241,610) | (255,561) | ||
Other Shareholders' Investment | 7,959,473 | 7,795,780 | ||
Total Liabilities and Shareholders' Investment | $ 13,426,757 | $ 13,306,919 |
HORMEL FOODS CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS In thousands Unaudited | ||||||||
Quarter Ended | Nine Months Ended | |||||||
July 30, 2023 | July 31, 2022 | July 30, 2023 | July 31, 2022 | |||||
Operating Activities | ||||||||
Net Earnings | $ 162,571 | $ 218,826 | $ 597,437 | $ 720,215 | ||||
Depreciation and Amortization | 74,754 | 65,132 | 216,432 | 191,568 | ||||
Decrease (Increase) in Working Capital | 73,678 | (169,800) | (79,372) | (270,282) | ||||
Other | 5,998 | 71,887 | (5,741) | 121,656 | ||||
Net Cash Provided by (Used in) Operating Activities | 317,001 | 186,046 | 728,756 | 763,157 | ||||
Investing Activities | ||||||||
Net (Purchase) Sale of Securities | (2) | 5,664 | (49) | 1,296 | ||||
Net Purchases of Property, Plant, and Equipment | (77,678) | (60,360) | (163,224) | (188,140) | ||||
Proceeds from (Purchases of) Affiliates and Other Investments | 212 | 2,009 | (427,195) | 8,275 | ||||
Other | 47 | 6,672 | 1,980 | 6,742 | ||||
Net Cash Provided by (Used in) Investing Activities | (77,420) | (46,016) | (588,489) | (171,827) | ||||
Financing Activities | ||||||||
Proceeds from Long-term Debt | 1,980 | — | 1,980 | — | ||||
Repayments of Long-term Debt and Finance Leases | (2,208) | (1,474) | (6,584) | (6,498) | ||||
Dividends Paid on Common Stock | (149,944) | (141,860) | (442,560) | (415,923) | ||||
Share Repurchase | — | — | (12,303) | — | ||||
Other | 5,933 | 2,872 | 8,489 | 77,958 | ||||
Net Cash Provided by (Used in) Financing Activities | (144,238) | (140,462) | (450,977) | (344,463) | ||||
Effect of Exchange Rate Changes on Cash | (6,715) | (10,943) | (2,273) | (10,054) | ||||
Increase (Decrease) in Cash and Cash Equivalents | 88,628 | (11,375) | (312,983) | 236,814 | ||||
Cash and Cash Equivalents at Beginning of Year | 580,496 | 861,719 | 982,107 | 613,530 | ||||
Cash and Cash Equivalents at End of Period | $ 669,124 | $ 850,344 | $ 669,124 | $ 850,344 |
INVESTOR CONTACT: David Dahlstrom (507) 437-5248 | MEDIA CONTACT: Media Relations (507) 437-5345 |
View original content to download multimedia:https://www.prnewswire.com/news-releases/hormel-foods-reports-third-quarter-fiscal-2023-results-301914284.html
SOURCE Hormel Foods Corporation