AUSTIN, MINN. — Hormel Foods Corp. continued to see volume drop in its Retail operating unit — the company’s largest — during its fiscal third quarter, extending a decline from the first and second quarters this year.
“In Retail, as I mentioned last quarter, we expected a noisier top line in the back half of the year,” said John Ghingo, president and chief executive officer-elect of Hormel. “The divestiture of our whole bird turkey business and the exit from certain private label snack nut products weighed on year-over-year net sales comparisons.
“These actions, along with pricing elasticities and a challenging consumer environment, also affected volume during the quarter. While many of these factors were anticipated, the impact on volume was somewhat greater than we originally expected.”
Ghingo added that the consumer environment overall right now is “not improving.”
“Consumers are still feeling quite strained with low sentiment, and that strain, a lot of it comes from those cumulative effects of inflation, which we’ve talked about before,” he said. “I would add that high fuel prices have contributed further to that strain as this year has unfolded.”
For the third quarter ended July 26, net earnings fell to $59.6 million, equal to 11¢ per share on the common stock, compared with $183.7 million, or 33¢ per share, a year ago. Hormel’s net sales fell 2% to $2.96 billion from $3.03 billion the prior third quarter.
Hormel Chili was one of the company’s priority brands that delivered dollar sales growth during the third quarter.
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Hormel’s overall volume declined 7% across its three operating units (Retail, Foodservice and International) compared with the third quarter last year.
Retail volume dropped 9% while Retail net sales declined to $1.77 billion, down 4.3% from $1.85 billion a year ago. Retail profit also fell, easing 3.7% to $118 million from $122 million the year prior.
Despite the decline in Retail volume, sales and profit, Ghingo said, “The work we are doing to strengthen our protein-centric offerings is translating into marketplace momentum for our priority brands, with several delivering net sales growth in the quarter and continuing to gain traction with consumers. Sales of Jennie-O ground turkey and the Applegate portfolio grew this quarter, benefiting from sustained demand for protein-rich offerings.
“Hormel chili and our refrigerated entrees also delivered dollar sales growth, reflecting consumers’ desire for convenient, versatile, and flavor-forward meal solutions. Planters also delivered a strong quarter, fueled by impactful in-store activations and continued investment behind the brand.”
Ghingo said other brands that saw growth for Hormel during the quarter included Herdez and Black Label bacon.
Foodservice volume fell slightly by 1.5%, while net sales rose 1.6% to $1 billion from $987 million last year. Foodservice profit increased 2.7% compared with the previous year’s third quarter, and the company saw a 12th consecutive quarter of organic net sales growth in the segment.
“Premium prepared proteins and branded pepperoni were particularly strong contributors (in Foodservice) during the quarter, reflecting our ability to align with operator demand for differentiated value-added solutions,” Ghingo said. “Importantly, our top-line results were achieved despite the impact of lower commodity-based pricing in portions of the business. Foodservice profit growth once again outpaced sales performance, driving another quarter of margin expansion.”
Hormel said its branded pepperoni was a “strong contributor” to the company’s positive results in its Foodservice segment during the quarter.
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The International unit saw the biggest decrease in volume (11%) while net sales dropped 4.7%, and the segment lost $29 million compared with a profit of $19 million a year ago.
The company said the loss came from a combination of selling its operations in Brazil — which Ghingo said was a “subscale business in a challenging environment” — an impairment related to a minority investment in Indonesia, and certain Spam export sales adversely impacted due to a one-time legal entity transition.
“We announced the definitive agreement to sell our operations in Brazil,” said Paul Kuehneman, interim chief financial officer and controller. “As a result, we recognized a loss during the quarter, which was recorded at the corporate level. The transaction closed early in the fourth quarter. As such, Brazil’s operating results will be excluded from our organic volume and net sales comparisons going forward.”
Based on its third-quarter results, Hormel adjusted its outlook slightly for the rest of fiscal 2026.
“We expect fiscal 2026 net sales to be in the range of $12.1 billion to $12.2 billion (previously $12.2 billion to $12.5 billion), which represents organic growth of 1% to 2%,” Kuehneman said. “We narrowed and raised our full-year adjusted operating income and adjusted earnings per share guidance ($1.45 to $1.51), which now represents growth of 6% to 10% year over year.”
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