Hormel Foods Reports Third Quarter Results And Updates Full Year Earnings Guidance Range

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AUSTIN, Minn., Sept. 2, 2021 /PRNewswire/ — Hormel Foods Corporation (NYSE: HRL), a leading global branded food company, today reported results for the third quarter of fiscal 2021. All comparisons are to the third quarter of fiscal 2020 unless otherwise noted.

EXECUTIVE SUMMARY – THIRD QUARTER

  • Volume of 1.2 billion lbs., up 1%; organic volume1 down 2%
  • Record net sales of $2.9 billion, up 20%; organic net sales1 up 14%
  • Net sales growth from all four segments and all four sales channels
  • Net sales up 25% compared to 2019 pre-pandemic levels
  • Operating income of $207 million, down 17%; adjusted operating income1 of $248 million, down 1%
  • Operating margin of 7.2%, compared to 10.5% last year; adjusted operating margin1 of 8.7%
  • Effective tax rate of 13.3%, compared to 21.6% last year
  • Diluted earnings per share of $0.32, down 14% compared to last year; adjusted diluted earnings per share1 of $0.39, up 5% compared to last year

EXECUTIVE COMMENTARY
“Our team delivered the highest quarterly net sales result in the company’s history, with growth from every segment and all four channels,” said Jim Snee, chairman of the board, president and chief executive officer. “This record performance demonstrates the power of our brands and our team’s ability to successfully integrate the Planters® business, which is quite an accomplishment, given the difficult operating conditions again this quarter.”

“Our ability to deliver consistent quarter-after-quarter top-line growth during this very dynamic time along with 25 percent sales growth over pre-pandemic levels is directly linked to the tremendous progress we have made in expanding our portfolio to reach consumers when and where they want to eat,” Snee said. “Our investments in retail, deli and e-commerce helped carry us through the initial phases of the pandemic last year as consumers shifted to more at-home eating occasions. Today, our leadership positions in foodservice and snacking have fueled an acceleration in growth as consumers pivot to spending more time in restaurants, traveling, and hosting gatherings with family and friends. This balance across consumer eating occasions is just one of the many things that make our company uncommon.”

“We saw significant inflationary pressure in almost all areas of our business, including raw materials, packaging, freight, labor and many other inputs during the quarter,” Snee said. “We have implemented pricing actions across virtually every brand, which has been our main lever to offset these inflationary pressures. In addition, our experienced management team is taking numerous other strategic actions to offset cost increases, including optimizing promotional activity, improving product mix and rationalizing less efficient products in our portfolio.”

“We are managing through industrywide operational challenges, including labor availability, upstream and downstream supply chain disruptions, and highly volatile and inflationary input costs,” Snee said. “I am extremely proud of the way our team is navigating through these complexities while never losing sight of the company’s long-term strategy for growth.”

OUTLOOK
“We expect to deliver record sales again in the fourth quarter, along with improving margins as additional pricing actions go into effect,” Snee said. “The combination of a balanced and diversified portfolio, numerous strategic investments and the addition of the Planters® brand leaves us very optimistic about our future.”


Fiscal 2021 Outlook*

Net Sales Guidance (in billions)

$11.0 – $11.2

Diluted Earnings per Share Guidance

$1.65 – $1.69

*Includes the acquisition of the Planters® snack nuts business

The company issued its full-year net sales and earnings per share guidance ranges to reflect the full impact of the acquisition of the Planters® snack nuts business. Additionally, the earnings per share guidance range includes the impact of inflationary pressures on the business, which will not be fully offset this fiscal year.

PLANTERS® INTEGRATION UPDATE
In June 2021, the company closed on the acquisition of the Planters® snack nuts business. Since closing, the company has successfully integrated numerous functions. During the third quarter, the company recognized in excess of $40 million in acquisition costs and accounting adjustments related to the acquisition.

CHANNEL HIGHLIGHTS – THIRD QUARTER
In an effort to add an increased level of disclosure and clarity to sales trends compared to the prior year and pre-pandemic levels, net sales have been disaggregated into sales channels. Demand for the company’s retail items remained elevated, as exhibited by growth compared to the prior year and double-digit growth over fiscal 2019. Foodservice sales continued to exceed pre-pandemic levels and accelerated compared to the second quarter of fiscal 2021. Deli channel sales increased due to growth from branded grab-and-go and prepared foods items. International sales increased due to strong growth from branded and fresh pork exports, and growth from China and Brazil. The company benefited from pricing actions across many categories and the contributions from the Planters® snack nuts business during the quarter.








Thirteen Weeks Ended



July 25, 2021
compared to
July 26, 2020


July 25, 2021
compared to
July 28, 2019

Net Sales Percent Change (%)





U.S. Retail


9



31


U.S. Foodservice


45



17


U.S. Deli


12



16


International


36



33


Total


20



25







SEGMENT HIGHLIGHTS – THIRD QUARTER

Refrigerated Foods

  • Volume down 2%; organic volume1 down 3%
  • Net sales up 19%; organic net sales1 up 18%
  • Segment profit flat

Net sales increased due to strong results from the foodservice, retail and deli businesses, and elevated pricing across most categories. The recovery in foodservice continued to accelerate, with net sales exceeding both last-year and pre-pandemic levels in almost every category. Retail and deli sales increased due primarily to growth from Hormel® Black Label® bacon, Columbus® grab-and-go items, Hormel® refrigerated entrees and Hormel® Gatherings® party trays. The decline in volume was due to lower shipments of commodity pork. Higher earnings from the foodservice business, numerous pricing actions and increased commodity profits fully offset significantly higher raw material costs and increased freight expenses. Volume, net sales and segment profit were negatively impacted by production constraints due to labor shortages.

Grocery Products

  • Volume up 4%; organic volume1 down 6%
  • Net sales up 20%; organic net sales1 flat
  • Segment profit up 1%

Volume and net sales increased due to the inclusion of the Planters® snack nuts business. On an organic basis, sales growth from brands such as SPAM®, Hormel® Compleats® and Wholly® overcame the impact of lower contract manufacturing sales. Segment profit increased due to strong results from the MegaMex joint venture and the contribution from the Planters® snack nuts business. These benefits were offset by higher input costs, and higher manufacturing and logistics costs. Volume, net sales and segment profit were negatively impacted by production constraints due to labor shortages.

Jennie-O Turkey Store

  • Volume up 9%
  • Net sales up 22%
  • Segment profit down 17%

Volume and net sales increased due to improved foodservice, whole bird and commodity shipments. Sales of Jennie-O® lean ground turkey increased due to pricing actions implemented in prior quarters and remain meaningfully above pre-pandemic levels. Segment profit was lower due to the impact of significantly higher feed costs and an increase in freight expenses.

International & Other

  • Volume up 2%; organic volume1 up 1%
  • Net sales up 26%; organic net sales1 up 24%
  • Segment profit up 18%

Strong sales growth from SPAM® luncheon meat, a recovery in foodservice exports, continued strong results in China and improved performance in Brazil led to record net sales during the quarter. In addition to higher sales, the improvement in segment profit was driven by higher branded and fresh pork export margins.

SELECTED FINANCIAL DETAILS
Income Statement

  • Selling, general and administrative expenses were up 25% compared to the prior year due to one-time acquisition costs and accounting adjustments related to the acquisition of the Planters® snack nuts business. Adjusted selling, general and administrative expenses1 as a percent of net sales decreased compared to…

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