Hormel Foods Reports Third Quarter Fiscal 2024 Results

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September 4, 2024

Austin, Minn.

Delivers better-than-expected earnings and sees growing benefits from transform and modernize initiative

Hormel Foods Corporation (NYSE: HRL), a Fortune 500 global branded food company, today reported results for the third quarter of fiscal 2024, ended July 28, 2024. All comparisons are to the comparable period of fiscal 2023, unless otherwise noted.

EXECUTIVE SUMMARY — THIRD QUARTER

Volume of 1.02 billion lbs.
Net sales of $2.90 billion
Operating income of $237 million; adjusted operating income1 of $267 million
Operating margin of 8.2%; adjusted operating margin¹ of 9.2%
Earnings before income taxes of $226 million; adjusted earnings before income taxes¹ of $256 million
Effective tax rate of 21.7%
Diluted net earnings per share of $0.32; adjusted diluted net earnings per share¹ of $0.37
Cash flow from operations of $218 million

EXECUTIVE COMMENTARY AND OUTLOOK

“We delivered solid third-quarter results and another quarter of better-than-expected earnings.” said Jim Snee, chairman of the board, president and chief executive officer. “Many of our key retail brands are growing, outperforming their categories and, most importantly, resonating with our customers and consumers. Our Foodservice business continued to deliver above-industry growth, highlighting the importance of our solutions-based portfolio, direct selling team, and diverse customer and operator base. We again experienced significant recovery in our International segment, led by our global brands. Lastly, we continued to realize growing benefits from our transform and modernize initiative, creating impactful improvements across our supply chain.”

“Our team remains focused on finishing the year strong and executing on our strategic priorities,” said Snee. “In the fourth quarter, we expect continued momentum across many of our key retail brands, growth within our Foodservice and International businesses, improved service levels for the Planters^® snack nuts business, and further advancements of our transform and modernize initiative.”

For fiscal year 2024, the Company is:

Updating its net sales range expectations to $11.8 billion to $12.1 billion, reflecting lower-than expected commodity markets, production disruptions at its Suffolk, Virginia, facility, and declines in its contract manufacturing business.
Narrowing its expected diluted net earnings per share range to $1.45 to $1.51 (previously $1.45 to $1.55) and its adjusted diluted net earnings per share1 range to $1.57 to $1.63* (previously $1.55 to $1.65).
Including an updated estimate of $0.06 per share impact related to production disruptions at its Suffolk, Virginia, facility. Furthermore, the Company is assessing the financial impact related to storm damage at its Papillion, Nebraska, facility.
Assuming continued benefits to net earnings from its transform and modernize initiative.


Fiscal 2024 Outlook	Current	Previous
Net Sales	$11.8 – $12.1 billion	$12.2 – $12.5 billion
Adj. Diluted Net Earnings per Share*	$1.57 – $1.63	$1.55 – $1.65
Effective Tax Rate	22.0 – 23.0%	22.0 – 23.0%

*Adjusted diluted net earnings per share1 excludes the estimated impact of $0.08 per share from nonrecurring costs associated with the Company’s transform and modernize initiative and approximately $0.04 per share resulting from legal settlements. Please see discussion of non-GAAP measures and a reconciliation of the Company’s fiscal year 2024 guidance for estimated adjusted diluted net earnings per share1 at the end of this release.

PROGRESS EXECUTING STRATEGIC PRIORITIES – Q3 HIGHLIGHTS

Drive focus and growth in our Retail business

We grew volume and dollar sales^2,3 for many products during the quarter, including Skippy^® peanut butter, Jennie-O^® lean ground turkey, Applegate^® natural and organic meats, Wholly^® and Herdez^® guacamole, Lloyd’s^® barbecue items and Corn Nuts^® corn kernels.
Hormel^® Black Label^® bacon achieved strong results during the quarter, growing volume, dollar sales, and household penetration.^2,4
We introduced SPAM^® Korean BBQ Flavored, our latest flavor innovation in the SPAM^® family of products. This is the brand’s 12th permanent variety and is aimed at loyal SPAM^® fans and the next generation of consumers.

Expand leadership in Foodservice

We again delivered a strong quarter of volume and net sales growth, led in part by Hormel^® Bacon 1™ cooked bacon, premium prepared proteins and Jennie-O^® turkey items.
Premium prepared proteins continue to offer solutions-based options to our operators. Our newest items — Hormel^® Flash 180™ sous vide-style chicken breast and Hormel^® Fire Braised™ loin back ribs — both contributed growth this quarter.
We continued to experience strong customer acceptance for Hormel^® ribbon pepperoni in the quarter, another example of the innovation that our Foodservice team brings to the marketplace.

Aggressively develop our global presence

Innovation continues to be key to our international growth strategy. We launched new snacking innovation in China during the quarter, supporting our retail recovery.
We expanded distribution in the South Korean market through Skippy^® product offerings.
SPAM^® luncheon meat delivered a second consecutive quarter of double-digit top-line growth⁵ with strong shipments to Canada, Southeast Asia and Japan.

Execute our enterprise entertaining & snacking vision

We launched the Planters^® Nut Duos Duo-licious advertising campaign and this new product offering is attracting younger consumers to the snack nuts category.⁴
We grew household penetration⁴ for Hormel^® pepperoni, America’s No. 1 pepperoni brand,² reflecting its continued relevance to consumers.

Future-fit our One Supply Chain/Continue to transform & modernize our Company

We made further progress across all pillars (Plan, Buy, Make, Move, and Portfolio Optimization) of our transform and modernize initiative, notably:
- Plan: We continued the implementation of a new end-to-end planning process and technology and are improving inventory management practices.
- Make: We continued to generate improved operational results in our manufacturing facilities, unlocking production capacity and generating cost savings across our network.
We published our 2023 Global Impact Report, a comprehensive update on our 20 By 30 Challenge. The report demonstrates the Company’s ongoing commitment to corporate responsibility.

SEGMENT HIGHLIGHTS – THIRD QUARTER

Retail

Volume down 9%
Net sales down 7%
Segment profit down 15%

Volume and net sales declined, primarily due to significant year-over-year volume and pricing declines for whole bird turkeys, lower sales of Planters^® snack nuts resulting from production disruptions at the Suffolk, Virginia, facility, and lower center-store and contract manufacturing volumes. Partially offsetting these declines were net sales growth for many key brands, including Hormel^® Black Label^® bacon, Applegate^® natural and organic meats, Jennie-O^® ground turkey, Skippy^® peanut butter, Wholly^® guacamole, Herdez^® salsas and sauces, and Hormel^® Square Table™ entrees. Segment profit declined, as the benefit from lower logistics expenses and savings from the transform and modernize initiative were more than offset by the impact of lower net sales.

Foodservice

Volume up 2%
Net sales up 7%
Segment profit down 3%

Volume and net sales growth were driven primarily by strong performance across the turkey, premium prepared proteins, bacon and pepperoni categories. Notable products such as Hormel^® Fire Braised™ meats, Hormel^® Bacon 1™ cooked bacon, Café H^® globally inspired proteins and Rosa Grande^® premium pepperoni delivered strong volume and net sales growth. Growth from branded Jennie-O^® turkey items continue to benefit top-line results. Segment profit decreased in the current quarter, as higher sales were more than offset by higher SG&A expenses.

International

Volume down 13%
Net sales down 2%
Segment profit up 78%

Robust volume and net sales growth for SPAM^® luncheon meat, refrigerated foodservice exports, and Skippy^® peanut butter exports were more than offset by the difficult comparison in the prior year to higher export volumes of low-margin commodity fresh pork and turkey. Segment profit increased significantly in the current quarter, driven by improved export margins, growth from our investments in the Philippines and Indonesia, and favorable costs in China.

SELECTED FINANCIAL DETAILS – THIRD QUARTER FISCAL 2024

Advertising investments were $40 million, compared to $43 million last year. The decline is partially due to lower support for the Planters^® brand due to production disruptions at the Suffolk, Virginia, facility. The Company expects full-year advertising expense to increase compared to the prior year.
The effective tax rate was 21.7%, even with last year. The effective tax rate for fiscal 2024 is expected to be between 22.0% and 23.0%.
Capital expenditures were $65 million, compared to $78 million last year. The Company’s target for capital expenditures in fiscal 2024 is $280 million.
Depreciation and amortization expense was $64 million, even with last year. The full-year expense for fiscal 2024 is expected to be approximately $250 million.
The third quarter marked the 96th year of uninterrupted dividends paid to stockholders. The Company returned approximately $155 million to stockholders during the quarter.

PRESENTATION
A conference call will be webcast at 8 a.m. CT on Sep. 4, 2024. Access is available at www.hormelfoods.com by clicking on “Investors.” The call will also be available via telephone by dialing 800-549-8228 (toll-free) or 646-564-2877 (international) and providing the conference ID 99159. An audio replay is available at www.hormelfoods.com. The webcast replay will be available at noon CT, Sep. 4, 2024, and will remain on the website for one year.

Click here to view the full release.

END NOTES
¹ Non-GAAP measure. See Appendix: Non-GAAP Measures to this news release for more information.
² Circana Total US MULO;13 weeks ended 7/14/2024 vs YAG.
³ SPINS Satori, Total US Natural; 12 weeks ended 7/14/2024 vs YAG.
⁴ Circana, Receipt Panel, Total Omnichannel; 13 weeks ended 7/14/24.
⁵ Internal data.

About Hormel Foods – Inspired People. Inspired Food.™

Hormel Foods Corporation, based in Austin, Minn., is a global branded food company with over $12 billion in annual revenue across more than 80 countries worldwide. Its brands include Planters^®, Skippy^®, SPAM^®, Hormel^® Natural Choice^®, Applegate^®, Justin’s^®, Wholly^®, Hormel^® Black Label^®, Columbus^®, Jennie-O^® and more than 30 other beloved brands. The company is a member of the S&P 500 Index and the S&P 500 Dividend Aristocrats, was named one of the best companies to work for by U.S. News & World Report, one of America’s most responsible companies by Newsweek, recognized by TIME magazine as one of the World’s Best Companies, received a perfect score of 100 on the 2023–24 Corporate Equality Index and has received numerous other awards and accolades for its corporate responsibility and community service efforts. The company lives by its purpose statement — Inspired People. Inspired Food.™ — to bring some of the world’s most trusted and iconic brands to tables across the globe. For more information, visit hormelfoods.com.

FORWARD-LOOKING STATEMENTS

This news release contains “forward-looking” information within the meaning of the federal securities laws. The “forward-looking” information may include statements concerning the Company’s outlook for the future as well as other statements of beliefs, future plans, strategies, or anticipated events and similar expressions concerning matters that are not historical facts. Words or phrases such as “should result,” “believe,” “intend,” “plan,” “are expected to,” “targeted,” “will continue,” “will approximate,” “is anticipated,” “estimate,” “project,” or similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those anticipated or projected, which factors include, but are not limited to, risks related to the deterioration of economic conditions; risks associated with acquisitions, joint ventures, equity investments, and divestitures; the risk of disruption of operations, including at owned facilities, comanufacturers, suppliers, logistics providers, customers, or other third-party service providers; risk related to the remediation of production disruptions at the Suffolk, Virginia, facility; the risk that the Company will fail to realize anticipated cost savings or operating efficiencies associated with strategic initiatives, including the transform and modernize initiative; risk of loss of a material contract; risk of the Company’s inability to protect information technology systems against, or effectively respond to, cyber attacks against it or others with whom it does business, security breaches or other IT interruptions; deterioration of labor relations or labor availability or increases to labor costs; general risks of the food industry, including food
contamination or outbreaks of disease among livestock and poultry flocks; fluctuations in commodity prices and availability of raw materials and other inputs; fluctuations in market demand for the Company’s products; risks related to the Company’s ability to respond to changing consumer preferences and the success of innovation and marketing investments; damage to the Company’s reputation or brand image; risks associated with climate change, or legal, regulatory, or market measures to address climate change; risks of litigation; potential sanctions and compliance costs arising from government regulation; compliance with stringent environmental regulations and potential environmental litigation; risks and uncertainties associated with intangible assets, including any future goodwill or intangible assets impairment charges; and risks arising from the Company’s foreign operations, including geopolitical risk, exchange rate risk, and risks associated with tariffs. Please refer to the cautionary statements regarding “Risk Factors” and “Forward-Looking Statements” that appear in our most recent Annual Report on Form 10-K and Quarterly reports on Form 10-Q, which can be accessed at www.hormelfoods.com in the “Investors” section, for additional information. In making these statements, the Company is not undertaking, and specifically declines to undertake, any obligation to address or update each or any factor in future filings or communications regarding the Company’s business or results, and is not undertaking to address how any of these factors may have caused changes to discussions or information contained in previous filings or communications. Though the Company has attempted to list comprehensively these important cautionary risk factors, the Company wishes to caution investors and others that other factors may in the future prove to be important in affecting the Company’s business or results of operations. The Company cautions readers not to place undue reliance on forward-looking statements, which represent current views as of the date made.
Note: Due to rounding, numbers presented throughout this news release may not sum precisely to the totals provided, and percentages may not precisely reflect the absolute figures.