Hormel Foods Corp.
stock slid 4.7% Wednesday after the meat and food products company topped fiscal fourth-quarter profit forecasts but fell short on sales and said it expected a continued “volatile, complex and high-cost environment.”
The owner of brands that include Spam, Planters and Skippy peanut butter saw sales suffer a 15% decline in sales of turkey, which were hit by the avian flu outbreak that has impacted poultry supplies across the industry this year. Jennie-O-Turkey volumes were down 32%, or roughly a third.
Refrigerated foods, the largest segment by sales, were also a weak spot with sales down 7% and volumes down 19%. The segment, which includes Natural Choice meats, Hormel Bacon and Fire Braised flame-seared meats, was also hurt by the absence of the extra week in the fourth quarter of 2021.
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“The decline in segment profit was driven by lower commodity profitability and higher operational, logistics and raw material costs,” the company said in a statement.
Grocery sales were up 3%, while volume fell 4%, after price hikes. Most U.S. companies have been raising prices this year to combat inflation, which has been running at more than 7% from a year ago, according to government data.
“Sales increased due to strong demand for Skippy peanut butter and the impact of pricing actions across the Mexican and simple-meals portfolios,” the company said.
On a call with analysts, Snee said Austin, Minn.-based Hormel made good progress on a transition to a new structure that involves three operating segments of retail, food service and international that was put in place on Oct. 31.
“Over the last month, we have been working to create a unified retail organization with scale, experience, expertise and passion to grow our almost $8 billion portfolio of brands,” said Snee, according to a FactSet transcript. “We are approaching customers differently, bringing together subject matter experts from across our businesses to find growth opportunities and execute strategies in the marketplace.”
Earnings will be reported under the new structure starting with fiscal first-quarter numbers, which are due to be released in early March, he said.
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Overall, Hormel posted net income for the quarter to Oct. 30 of $279.9 million, or 51 cents a share, compared with $281.7 million, or 51 cents a share, in the year-ago period. The FactSet consensus for earnings per share was 50 cents.
Sales slipped 5.0% to $3.28 billion, below the FactSet consensus of $3.38 billion.
Cost of products sold fell 5.5% to $2.72 billion, as gross margin improved to 17.3% from 16.7% after the company raised prices.
For fiscal 2023, the company expects EPS of $1.83 to $1.93, compared with the FactSet consensus of $2.01, and projects sales of $12.6 billion to $12.9 billion, which is below consensus expectations of $13.05 billion.
Shares have fallen 6% in the year to date, while the S&P 500 has fallen 17%.
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