Hormel Foods Corporation, a Fortune 500 leading global branded food company, reported results for the fourth quarter of fiscal 2022.
Executive summary – fiscal 2022
- Record net sales of $12.5 billion, up 9%; organic net sales up 6%, excluding the partial-year impact of the Planters snack nuts business and an additional week last year.
- Operating income of $1.3 billion, up 17%; up 13% compared to adjusted operating income of $1.2 billion last year.
- Operating margin of 10.5% compared to 9.9% last year and compared to adjusted operating margin of 10.2% last year.
- Pretax earnings of $1.3 billion, up 13%; up 9% compared to adjusted pretax earnings of $1.2 billion last year.
- Diluted earnings per share of $1.82, up 10%; up 5% compared to adjusted diluted earnings per share of $1.73 last year.
Executive summary – fourth quarter
- Net sales of $3.3 billion, down 5%; organic net sales up 2%, excluding the impact of an additional week last year.
- Operating income of $367 million, up 3%.
- Operating margin of 11.2% compared to 10.4% last year.
- Pretax earnings of $357 million, up 1%.
- Diluted earnings per share of $0.51, comparable to $0.51 last year.
“We achieved all-time record sales and double-digit profit growth in fiscal 2022,” Jim Snee, chairman of the board, president and chief executive officer, said in the announcement. “In addition to delivering year-over-year growth, our team successfully integrated the Planters business, made progress on our six strategic priorities, showed tremendous resolve in overcoming a challenging operating environment, and laid the groundwork for the next step in our evolution as a global branded company, the Go Forward (GoFWD) initiative.
“In the fourth quarter, our team delivered diluted earnings per share comparable with record results last year, which included an additional week of sales. These results further demonstrate that our brands remain healthy, and the strategic investments we have made are enabling growth. Organic volume and organic net sales growth were led by our center-store grocery portfolio as well as another solid performance from our foodservice businesses. We saw volume and sales growth from many retail brands and products in market, including Hormel Black Label bacon, SKIPPY peanut butter products, SPAM products, Hormel chili, Hormel Gatherings party trays and Lloyds meats. Segment profit growth was due to the Jennie-O Turkey Store segment, as the team effectively managed limited turkey supply and maximized operational performance. We also made progress across our supply chain to increase production capabilities and restore inventories on key product lines.”
The company transitioned to three operating segments – retail, foodservice and international – and began operating under the new model on Oct. 31, 2022. As part of the transition, implementation activities in the first quarter are expected to include:
- Adopting a new organizational design, management structures and accountabilities.
- Continuing the work to fully integrate Jennie-O Turkey Store into the company’s One Supply Chain and new operating segments.
- Standing up the Brand Fuel Center of Excellence, which will house enterprise-wide brand management expertise, e-commerce capabilities, insights-led innovation and analytical support to further enable data-driven decisions.
“The deliberate and thoughtful steps we have taken thus far are all about creating the Hormel Foods of the future,” Snee added in the announcement. “We are excited for the additional collaboration, capabilities and value we will realize from this transition and are increasingly confident in our ability to drive long-term sustainable growth.”
Changes to the company’s operating segments have no impact on historical consolidated results of operations, financial position or cash flows. The company will provide recast financial information for fiscal years 2021 and 2022 in February 2023. Earnings will be reported under this structure beginning with the release of fiscal 2023 first quarter results in early March.
Fiscal 2023 guidance
“We enter the new fiscal year well-positioned in the retail, foodservice and international channels, and expect to drive top-line growth,” Snee said in the announcement. “We believe higher levels of brand investment, increased production capacity and our initial GoFWD actions further support this expectation. We anticipate earnings growth to be driven by our Foodservice and International segments, and improvements across the supply chain.
“We expect to operate in a volatile, complex and high-cost environment again in fiscal 2023. We have benefited from our balanced business model, which is not heavily dependent on any one channel, protein, input or product category. Our long-term strategy to meet consumers where they want to eat, with a broad portfolio of trusted brands and products, will continue to be a key differentiator for our business, helping to drive growth for our customers and operators.”
Channel highlights – fiscal 2022
Net sales growth for the year was driven by the company’s U.S. channels, which benefited from elevated demand for many of its leading retail and value-added foodservice brands, pricing actions to mitigate inflationary pressures and the full-year contribution of the Planters snack nuts business. Sales for the international channel declined, primarily due to lower export sales. The fourth quarter and full year of 2022 reflect one fewer week compared to the prior year.
Segment highlights – fourth quarter
- Volume down 19%; organic volume down 13%.
- Net sales down 7%; organic net sales1 comparable to last year.
- Segment profit down 15%.
Products such as Hormel Natural Choice meats, Hormel Bacon fully cooked bacon, Hormel Fire Braised flame-seared meats, Hormel Gatherings party trays and Applegate breaded chicken grew volume and sales for the quarter. Overall net sales declined due to the impact from an additional week in the fourth quarter of last year and lower commodity sales. Consistent with the company’s long-term strategy to better align resources to value-added growth, the overall decline in volume was primarily due to lower commodity sales resulting from the company’s new pork supply agreement. The decline in segment profit was driven by lower commodity profitability and higher operational, logistics and raw material costs.
- Volume down 4%; organic volume up 4%.
- Net sales up 3%; organic net sales up 11%.
- Segment profit down 8%.
Net sales increased due to strong demand for SKIPPY peanut butter and the impact of pricing actions across the Mexican and simple-meals portfolios. Organic volume and net sales gains were led by the SPAM, SKIPPY, WHOLLY, Herdez and Dinty Moore brands. Segment profit declined, as pricing actions did not offset the impact from continued inflationary pressures.
Jennie-O Turkey Store
- Volume down 32%; organic volume down 27%.
- Net sales down 15%; organic net sales down 8%.
- Segment profit up 149%.
As anticipated, volume and sales declined as a result of the supply impacts on the company’s vertically integrated supply chain from highly pathogenic avian influenza (HPAI). Segment profit growth was primarily due to higher commodity prices and improved value-added mix.
International & Other
- Volume comparable to last year; organic volume up 8%.
- Net sales down 2%; organic net sales1 up 6%.
- Segment profit down 4%.
Volume and net sales growth from the SPAM and SKIPPY brands and the multinational businesses were offset by lower fresh pork and refrigerated export sales. Fresh pork sales declined as a result of the company’s new pork supply agreement. Segment profit growth in China did not overcome declines in the export business and elevated logistics expenses.