Demand for bacon and refrigerated foods helped Hormel Foods Corporation weather through the third quarter of fiscal 2019, despite volatile input costs caused by African swine fever. The Austin, Minn.-based company reported earning $199.4 million, or 37 cents a share, in its fiscal third quarter, compared to $210.2 million, or 39 cents a share, in its third quarter of fiscal 2018. Net sales were $2.3 billion, down 3%, but in line with analysts’ forecasts.
“We delivered earnings in line with our expectations this quarter as our experienced management team reacted quickly and appropriately to rapidly changing market conditions,” says Jim Snee, chairman of the board, president and chief executive officer. “Disciplined pricing, strategic promotional activity, effective advertising and insight-led innovation all played a positive role in our performance. The fundamentals of our company are strong, and we remain focused on delivering our key results as we navigate near-term commodity market uncertainty.
“Innovative branded product lines such as Hormel Bacon 1 cooked bacon, Hormel Fire Braised products, SkippyP.B. & Jelly Minis, and Herdez salsas all delivered strong sales growth. Our team also grew sales across many core brands such as SPAM, Dinty Moore, Mary Kitchen and Old Smokehouse.
“Double-digit earnings growth in Refrigerated Foods offset weaker results in Grocery Products. Refrigerated Foods effectively managed sales growth and profitability in the midst of volatile input costs caused by African swine fever. Many of our established brands in Grocery Products continue to outpace center store growth. However, the disappointing bottom-line performance for Grocery Products was driven by higher avocado costs in our MegaMex joint venture and lower results for our Skippy peanut butter spreads business.
“The Jennie-O Turkey Store team is working diligently to regain lean ground turkey distribution following the two voluntary product recalls. Our International team made progress growing the SPAM and Skippy brands in China while U.S. exports continue to be impacted by global trade uncertainty.”
Snee says the company is reaffirming its fiscal 2019 earnings guidance range.
“While we have yet to see sustained higher pork prices due to African swine fever, we have seen input cost volatility and are expecting further volatility. The Refrigerated Foods team has proven its ability to operate in various market conditions with a continued focus on value-added growth, disciplined pricing and innovation. Earnings pressure from higher avocado prices and peanut butter category dynamics will continue to impact results in Grocery Products in the fourth quarter,” Snee says. “Our experienced management team will continue to leverage our company's long-term strategy of building brands, innovating, making strategic acquisitions and increasing balance in our business to deliver long-term growth.”