Hormel Foods Corporation (HRL) shares traded lower on Wednesday following a revised fiscal year 2024 outlook attributed to production disruptions. While the company reported adjusted earnings per share of 37 cents for the third quarter, surpassing the analyst consensus of 36 cents, quarterly sales fell short of expectations at $2.898 billion, down 2.2% from the previous year and missing the estimated $2.95 billion. Adjusted operating margin also contracted to 9.2% from 9.7% in the same period last year.
Despite the challenges, Hormel Foods highlighted positive performance in several areas. Jim Snee, chairman of the board, president, and CEO, stated that many of their key retail brands are experiencing growth, outperforming their respective categories, and resonating well with customers. In the Retail segment, however, volume decreased by 9%, net sales dropped by 7%, and segment profit declined by 15%.
The Foodservice segment showed a different picture, with volume increasing by 2%, net sales rising by 7%, and segment profit declining by 3%. Snee emphasized that the Foodservice business continues to achieve growth above industry averages, attributing this to the company’s solutions-based portfolio, direct selling team, and diverse customer and operator base.
The International segment exhibited notable recovery, with volume decreasing by 13%, net sales falling by 2%, but segment profit surging by 78%. Snee attributed this turnaround to global brands and the benefits of the company’s transformation and modernization initiatives, which have resulted in significant improvements across the supply chain.
Looking ahead, Hormel Foods revised its fiscal year 2024 outlook. The company now expects net sales to range between $11.8 billion and $12.1 billion, down from the previous range of $12.2 billion to $12.5 billion and slightly below the $12.14 billion estimate. Adjusted earnings per share are projected to be between $1.57 and $1.63, compared to the previous range of $1.55 to $1.65 and the $1.60 estimate. The company attributed this revision to production disruptions at its Suffolk, Virginia, facility and is evaluating the financial impact of storm damage at its Papillion, Nebraska, facility.
Despite the challenges, Hormel Foods remains optimistic about the future. The company anticipates continued momentum across several key retail brands, growth within the Foodservice and International businesses, improved service levels for the Planters snack nuts business, and continued progress on its transform and modernize initiative.
