AUSTIN, Minn. – A solid performance across business segments boosted first-quarter net sales at Hormel Foods Corp.
Net sales for the quarter ended Jan. 27, 2019 were $2,360,355,000, an increase of 1.2 percent from $2,331,293,000 reported in the first quarter of 2018.
Net earnings attributable to Hormel Foods were $241,425,000, or $0.44 per diluted share, down from $303,107,000, $0.56 per diluted share, due to the impact of tax reform in 2018.
“We had a solid quarter with sales growth from Refrigerated Foods, Grocery Products and International,” said Jim Snee, chairman of the board, president and CEO. “Three of our four segments generated earnings growth, which keeps us on track to deliver our full-year guidance.”
On a segment basis, Hormel Deli Solutions led sales growth of 1.9 percent in Refrigerated Foods which reported $ 1,278,747,000 in net sales for the first quarter, according to the company. Columbus branded items and Jennie-O premium deli meats delivered strong gains, while foodservice sales of Old Smokehouse bacon and Hormel Fire Braised products showed growth. Retail sales of Hormel brand pepperoni, Natural Choice and Applegate products also showed growth during the quarter. “Segment profit increased as value-added profits more than offset a 70 percent decline in commodity profits, higher freight costs and higher operational expenses,” the company said.
“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.”
In Grocery Products, net sales advanced 1 percent to $606,825,000, up from 603,577,000 reported in the year-ago period. Herdez salsas and sauces, Wholly Guacamole dips, Spam products, Muscle Milk and Hormel bacon toppings contributed to results. Hormel noted that segment profit declined due to the effect of a non-operating tax benefit in the company’s MegaMex joint venture in fiscal 2018, which was partially offset by a legal settlement in fiscal 2019.
Net sales and segment profit were flat at Jennie-O Turkey Store, Hormel reported, as improved foodservice results were offset by declines in retail. For the first quarter, net sales were 321,234,000, compared with $322,760,000 reported in the first quarter of 2018.
Hormel Foods International segment reported net sales of $153,549,000, a gain of 2.1 percent from $150,319,000 in the first quarter of last year. “International volume, sales and profit increases were led by double-digit growth in exports of Spam luncheon meat and strong results from our China business,” the company said. “China results were positively impacted by strong sales of Spam and Skippy branded products and lower pork input costs. Fresh pork export volume, sales and profitability declined in the quarter due to the continued impact of tariffs in key markets.”
Earlier this week, Hormel announced the sale of its CytoSport business to PepsiCo for $465 million in cash, subject to adjustments at closing. Snee said, “We made strong progress with innovation and sales growth in the food, drug and mass channel. However, it became clear to us over time that PepsiCo is the right long-term owner of this business as they have deep expertise in this space. PepsiCo has been a long-standing distribution partner for CytoSport and the Muscle Milk brand, which puts them in a strong position to grow this dynamic business.”
For fiscal 2019, Hormel reaffirmed its guidance of $9.70 billion to $10.20 billion in net sales and $1.77 to $1.91 earnings per share.
“We remain encouraged by the growth prospects in Refrigerated Foods, Grocery Products and International,” Snee said. “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,” he said. “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.”