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Hormel Foods Reports First Quarter Results

Hormel Foods Reports First Quarter Results

Friday, February 22nd, 2019

Last week was a busy one for Hormel Foods. The company began with an announcement it would sell its CytoSport business to PepsiCo and ended supporting the results of its first quarter for fiscal 2019.

Jim Snee, Chairman of the Board, President and Chief Executive Officer, Hormel Foods“We had a solid quarter with sales growth from Refrigerated Foods, Grocery Products and International,” Jim Snee, Chairman of the Board, President, and Chief Executive Officer, said in the report. “Three of our four segments generated earnings growth, which keeps us on track to deliver our full-year guidance.”

First quarter highlights included:

  • Grocery products volume up 3%
  • Grocery products net sales up 1%
  • Grocery products segment profit down 2%
  • Refrigerated foods volume down 1%
  • Refrigerated foods net sales up 2%
  • Refrigerated foods segment profit up 3%

The company also noted that Jennie-O Turkey store volume, net sales, and segment profit were flat, though sales growth in refrigerated foods, specifically, was led by the new Hormel Deli Solutions division, with strong gains coming from Columbus® branded items and Jennie-O® premium deli meats.

“Our new Hormel Deli Solutions division is off to a great start as the next growth engine for our company,” Snee said. “In addition, many branded value-added businesses performed well this quarter, including our business in China and both Hormel and Jennie-O foodservice divisions. We also saw impressive growth from many retail brands, including SPAM®, Dinty Moore®, Herdez®, Wholly Guacamole®, Applegate®, Natural Choice®, and Hormel® pepperoni.”

The company announced its first quarter fiscal 2019 results

Overall, compared to the same quarter of fiscal 2018 stated:

  • A volume of 1.2 billion lbs., up 1%
  • Net sales of $2.4 billion, up 1%
  • Pre-tax earnings of $307 million, up 1%
  • Diluted earnings per share of $0.44, down $0.12 per share, due to the impact of tax reform in 2018
  • Cash flow from operations of $187 million, down 38%

“Again this quarter, our well-developed strategy of shifting our mix toward branded, value-added products in our domestic and international businesses more than offset significant declines in the commodity businesses,” Snee said. “We continue to intentionally transition our portfolio away from commodity products and the associated earnings volatility.”

As for the CytoSport business, Snee said Hormel made strong progress with innovation and sales growth in the food, drug, and mass channel, however, it became clear over time that PepsiCo is “the right long-term owner of this business.”

Though still subject to adjustments at closing, the purchase price is currently $465 million in cash. Total net sales in fiscal 2018 were approximately $300 million, with operating margins slightly below total company operating margins.

“We are reaffirming our sales and earnings guidance for fiscal 2019,” Snee concluded. “We remain encouraged by the growth prospects in Refrigerated Foods, Grocery Products, and International. The results we are seeing in our deli, foodservice, and China businesses are exceeding expectations. While the fundamentals in the turkey industry are improving, Jennie-O Turkey Store will likely fall below our full-year expectations due to a lower retail sales outlook. While global trade uncertainty remains, we continue to execute on our well-defined strategy that focuses on building world-class brands, leading with innovation and insights, making smart investment decisions, and building intentional balance into our business.”

To read the report in its entirety, click here.

Hormel Foods