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Dive Briefing:
Hormel Foods Corp. created Third quarter performance weaker than last yearIt was affected by falling turkey prices and production issues at the Planters peanut plant.
The Minnesota-based company said its retail sales fell 7 percent to $1.8 billion, citing significant volume and price declines from a year ago. While sales of bacon, ground turkey and peanut butter were up, retail profits fell 15 percent to $128 million during the period.
Despite retail headwinds, Hormel delivered strong foodservice and international results during the quarter, as the Spam and Jennie-O maker made progress on its plan to “transform and modernize” its operations through cost savings and supply chain improvements.
Dive Insight:
Hormel is leaning on foodservice and value-added products to somewhat protect itself from the volatile commodity price environment. Still, growth in the Jennie-O brand has more than offset the overall bird food market.
Additionally, production issues at a snack facility in Suffolk, Virginia, where a fire occurred earlier this year weighed on earnings. Hormel also suffered storm damage at its meat plant in Papillion, Nebraska, early in the fourth quarter. The plant produces salami and dried sausage products.
Jim Snee, president and CEO, said on the company's earnings call: Transformation Plan to Realize the Most Powerful Savings In the fourth quarter, we will continue to see growth driven by improvements at the corporate and manufacturing levels.
““We are on a realistic and achievable path to improving our business, delivering on our commitments and executing on our long-term strategic priorities,” Snee said.
Hormel saw retail sales growth in several key brands during the quarter, including Skippy peanut butter, Holy Guacamole and Applegate Natural Organic Meats, but struggled in other areas.
Meanwhile, Hormel's foodservice and international businesses recovered. Foodservice sales and volumes rose 7% and 2%, respectively, compared to the previous year, as higher overhead costs ate into profits.
Weak global turkey and pork prices offset sales growth for Spam and Skippy products, but Hormel's investments in the Philippines and Indonesia and favorable costs in China helped drive 78% global profit growth over the previous year.
Going forward, Hormel cut its full-year outlook to $12.1 billion from $11.8 billion, citing market challenges, weakness in its contract manufacturing business and the shutdown of its Suffolk, Virginia, plant.
