AUSTIN, MINN. — Fiscal 2023 financial results that did not meet expectations and a weak outlook for fiscal 2024 sent shares of Hormel Foods Corp. downward on Nov. 29. After opening the day at $31.55 per share, the stock price fell nearly 4.5% to close the day at $30.46 per share. The company was challenged on a variety of fronts throughout the fiscal year that ended Oct. 29, most notably by a decrease in consumer spending, volatility in the turkey market and an expected recovery in China.

“… Our results did not meet our expectations,” said James P. Snee, chairman, president and chief executive officer, during a Nov. 29 conference call to discuss fiscal 2023 results. “As we turn the page to fiscal 2024, there is urgency across the organization to improve our business.”

Net income for the fiscal year was $793.6 million, equal to $1.45 per share on the common stock, and down from $1 billion, or $1.82 per share, the year before.

Sales fell to $12.1 billion from $12.5 billion in fiscal 2022.

In the company’s Retail business unit, its largest, sales fell 3% to $7.8 billion from $8 billion the year before. Retail volume sold fell 5.9 % to 3 billion lbs from 3.3 billion lbs, and segment profit plummeted 20% to $578 million from $722 million the year prior.

In the Foodservice segment, sales fell 1.4% to $3.6 billion from $3.7 billion, and volume was flat at 1 billion lbs. International segment sales fell 7.5% to $722 million from $779 million the year before while volumes were flat. The International business unit’s profit fell 48.7% to $55 million from $108 million the year before.

Management did not spend much time during the Nov. 29 conference call looking back. Rather, the focus was on fiscal 2024 and what the company needs to do to improve results.

“Turning to our outlook for fiscal 2024, we expect to drive modest volume and net sales growth for the full year,” Snee said. “This growth is expected to come from our key categories, supported by higher brand investments and innovation. In Retail, we expect higher net sales across many of our verticals, including bacon, convenient meals and proteins, global flavors, emerging brands and snacking and entertaining. We have embedded in our outlook, targeted pricing actions, a step-up innovation and higher brand support to drive volume and improve mix.”

Management also expects “broad volume growth” in Foodservice let by turkey, pepperoni and bacon. In the International segment, increases in exports of Skippy and SPAM is anticipated as well as improvement in both the retail and foodservice channels in China.

“From a bottom-line perspective, we expect growth from the Foodservice and International businesses and expect a decline in our Retail segment,” Snee said. “While the Retail segment is expected to benefit from sales growth and improved mix, we do not anticipate this growth to overcome the significant headwind from the rapid decline in the commodity whole turkey market.”

Snee noted that when 2023 started whole-turkey prices were at all-time highs but have since fallen below the five-year average.

“We are closely monitoring sell through of whole turkeys this holiday season as well as any potential supply impacts from HPAI (highly pathogenic avian influenza), which has again affected flocks this fall,” he said. “These are very unusual market dynamics, which has added additional risk and uncertainty to our outlook.”

He also mentioned a shift of operations decided on earlier this year as part of the company’s strategy moving forward, specifically transitioning its Barron, Wis. turkey harvesting plant to a dedicated value-added facility.  

“Harvest operations are expected to cease during the second quarter of fiscal 2024. These actions at the Barron facility are consistent with the goals we laid out in late 2021 and when we first announced transformational efforts at Jennie-O Turkey Store,” Snee said.

The company also is assuming pork input costs will be higher in fiscal 2024 and remain above the five-year average.

“These costs are expected to continue to be a headwind in fiscal 2024 as the industry cycles through lower supplies,” said Jacinthe C. Smiley, chief financial officer.

The company is forecasting its branded export business will grow beyond the first quarter of fiscal 2024 and that business in China will improve.

“ … It’s early in (fiscal) 2024 but we are seeing some moderate improvement across foodservice and retail (in China),” Snee said. “But we're expecting that to accelerate as we move throughout the year.”