Lower hog volumes weakened sales in the refrigerated foods unit, while higher grain costs and lower commodity turkey meat prices hindered margins at the Jennie-O Turkey Store, yielding a 23% decrease in operating profit for the segment.
“The value of our balanced business model was again on display as strong results by our specialty foods, grocery products and international/all other segments offset weaker results by our Jennie-O Turkey Store segment,” said Jeffrey Ettinger, president and chief executive officer, in a Feb. 21 call with financial analysts to discuss first-quarter earnings.
Profit for Hormel’s specialty foods increased 43% in the quarter, with strong performance from Hormel Health Labs products, private-label canned meat, savory ingredients, nutritional products and ready-to-drink products.
Gains in the grocery products unit were driven by Spam, Hormel Chili, Mary Kitchen hash and Herdez salsa. Hormel Compleats microwave meals increased during the quarter, aided by new cheesy pasta items.
The company hopes to boost its refrigerated foods business with the spring launch of Hormel REV snack wraps. The portable product includes eight varieties of meat and cheese combinations rolled in flatbread and can be consumed cold or microwaved.
To mitigate headwinds in the Jennie-O Turkey Store unit, Hormel is reducing harvest volumes and adjusting pricing.
The company also expects eventual gains from its Skippy business, acquired from Unilever in January.
“The current business is solid from our standpoint, and we expect will soon see a substantial added benefit in two of our five operating segments from the Skippy acquisition,” Mr. Ettinger said. “Although our ownership of this iconic brand is in its early stages, we are excited by what we see in terms of opportunities for growth, both domestically and abroad. The financial benefits from this acquisition will emerge more significantly as the year proceeds, in that our second quarter will bear the burden of a large amount of the charges related to the transaction.”
Net income in the quarter ended Jan. 27 rose 1% to $129,716,000, equal to 49c per share on the common stock, which compared with income of $128,395,000, or 49c per share, during the same quarter of the previous year.
