Hormel Foods Q1 Earnings Call Highlights

• Hormel reported a “solid” fiscal Q1 with 2% organic net sales growth and adjusted diluted EPS of $0.34, driven by strong Foodservice and International performance while Retail declined.

• Gross profit was pressured by commodity inflation—especially beef and pork trim (up ~12%)—and rising logistics/freight costs, with management forecasting only modest commodity improvement in the back half of fiscal 2026.

• Hormel agreed to sell its whole-bird turkey business to Life‑Science Innovations to reduce exposure to volatile, low‑margin operations (expected to reduce net sales by about $50M), and reaffirmed full-year guidance of organic sales +1–4% and adjusted EPS $1.43–$1.51 while expecting restructuring savings to begin in Q2.

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Hormel Foods (NYSE:HRL) reported what executives described as a “solid” start to fiscal 2026, delivering 2% organic net sales growth in the first quarter and adjusted diluted earnings per share of $0.34. Management said strong results in Foodservice and International were partially offset by a decline in Retail, while inflation in key commodities and higher-than-expected logistics costs continued to pressure gross profit.

For the fiscal first quarter, net sales were “just over $3 billion,” supported by 2% organic net sales growth, marking the company’s fifth consecutive quarter of organic growth. Adjusted operating income was $247 million and adjusted operating margin was 8.2%, with an effective tax rate of 22.4%. Diluted EPS was $0.33, and adjusted diluted EPS was $0.34.

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Interim CEO Jeff Ettinger said the quarter’s performance reflected the strength of Hormel’s “protein-centric portfolio,” highlighting “high single-digit organic net sales growth” in both Foodservice and International along with “impressive segment profit growth.” Interim CFO Paul Kuehneman said gross profit remained “hampered,” as top-line growth was more than offset by higher input costs and logistics expenses.

Management emphasized continued commodity inflation as a headwind, particularly for beef, pork trim, and nuts. Kuehneman said pork trim increased 12% versus last year, and while the company saw “some relief on bellies,” beef remained “a significant inflationary pressure across the industry.” Hormel said it expects “a modest improvement in most commodity markets” in the back half of fiscal 2026, with pork input costs declining versus fiscal 2025 but still above the five-year average, while beef costs are expected to remain high throughout the year and nut costs elevated versus the prior year.

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Executives also pointed to tightening freight capacity. Kuehneman said severe winter weather and industry dynamics tightened capacity in the refrigerated sector late in the quarter, pushing spot rates higher and creating “modest upward pressure” on transportation costs. On the Q&A, Ettinger said it was “too early to tell” whether the freight costs were seasonal or could persist more broadly through the year.

Retail: President John Ghingo said Retail organic volume and organic net sales declined in the quarter, with retail net sales down 2% year over year. He attributed the top-line decline largely to a strategic exit from “select non-core private label snack nut items.” Despite the reported decline, Ghingo cited Circana data for the latest 13-week period ending Jan. 25 showing total Hormel dollar sales up “over 2%,” and said several priority brands posted year-over-year dollar consumption growth, including Jennie-O Ground Turkey, Planters snack nuts, Hormel Gatherings party trays, Applegate, and Hormel Entrees.

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Retail profitability, however, was “challenged,” pressured by lower net sales, expected increases in raw material costs, and “unexpected increases in logistics expenses.” Ghingo said the second wave of retail pricing went into effect at the beginning of the second quarter and was designed to offset cost pressures. He added that pricing actions had been “well accepted,” with elasticities generally in line with expectations.

Foodservice: Ghingo said Foodservice delivered its 10th consecutive quarter of organic net sales growth, driven by premium prepared proteins and branded pepperoni, and aided by what he described as a solutions-based portfolio for operators facing labor and operational pressures. He cited Austin Blues Smoked Meats, Hormel Fire Braised Meats, and Hormel Natural Choice Meats as strong performers. Addressing questions about pricing, Ghingo said foodservice pricing typically lags market moves, and that first-quarter pricing “came back in line with the market movements,” helping margins recover what was lost in the fourth quarter of fiscal 2025.

International: Hormel said International net sales growth was driven by its multinational businesses and branded exports, led by SPAM luncheon meats. Ghingo also highlighted the first-quarter launch of SPAM Chicken by the company’s China-based innovation team, including a can and single-serve pouch introduced in the Philippines.

Ettinger reiterated progress on the company’s “Transform and Modernize” initiative and said restructuring is “progressing as planned,” with financial benefits expected to materialize more meaningfully beginning in the second quarter. Ghingo added that the Hormel Production System moved beyond its foundational phase, and facilities that fully implemented it are driving “continuous improvement” and freeing capacity on core manufacturing lines.

Ghingo also noted steps to simplify the company, including a finalized “new strategic partnership for the Justin’s branded business,” which he said better aligns the business with an ownership model suited to its growth plan. On technology, he said Hormel completed another phase of order-to-cash modernization and is closer to retiring a legacy system. He also described using weather-driven demand intelligence to inform advertising decisions for Hormel Chili, which management said is producing stronger returns on investment.

The company highlighted leadership changes aimed at strengthening execution, including the appointment of:

• Jeff Baker as Group Vice President of Enterprise Business Performance

• Natosha Walsh as Group Vice President of Retail Sales

• Jason Levine as Enterprise Chief Marketing Officer

• Domenic Borrelli as Executive Vice President of Retail

Ettinger detailed a definitive agreement to sell Hormel’s whole bird turkey business to Life-Science Innovations (LSI), a move he said reduces exposure to volatile, commodity-driven operations and sharpens focus on value-added proteins. The sale includes the “hen side” of the turkey complex and assets including the Melrose, Minnesota whole bird facility, a Swanville feed mill, associated transportation assets, and supply contracts with dedicated third-party hen growers. The transaction is expected to close by the end of fiscal Q2.

Management emphasized the sale does not include value-added turkey products, and Hormel will continue to own and use the Jennie-O brand name. The company will retain the ability to sell Jennie-O Oven Ready whole birds and turkey breasts and will continue to own and operate other turkey assets related to tom production used for value-added products. Hormel also said most Jennie-O whole bird sales for the 2026 holiday season will remain in reported fiscal 2026 results, with LSI providing co-manufacturing services through the end of fiscal 2026.

For fiscal 2026, Kuehneman said the divestiture is expected to have a minimal impact on adjusted financials, with net sales reduced by about $50 million. On an annualized basis, the business typically generated $200 million to $275 million in net sales and was characterized by “high volatility and low margins.” Ettinger said it is “significantly dilutive” to retail margins in a typical year, with more profitable years described as outliers.

Looking ahead, Hormel reaffirmed full-year guidance for organic net sales growth of 1% to 4% and adjusted diluted EPS of $1.43 to $1.51, with adjusted operating income expected to grow 4% to 10%. For the second quarter, management expects another quarter of top-line growth and adjusted diluted EPS “flat to slightly up” year over year, citing the benefit of the second wave of retail pricing and the start of restructuring savings, while noting ongoing pressure from commodities and elevated logistics costs.

Hormel also highlighted liquidity and shareholder returns. Operating cash flow was $349 million, capital expenditures were $69 million (with projects including an ambient meat snacking facility in Jiaxing, China, and continued data and technology investment), and the company reiterated its commitment to its dividend, noting it paid its 390th consecutive quarterly dividend and returned approximately $160 million to shareholders through dividends during the quarter.

Hormel Foods Corporation is a global branded foods company primarily engaged in the production, marketing and distribution of value-added, high-quality meat and food products. The company’s portfolio spans a range of categories including refrigerated and frozen meats, pantry staples, specialty foods and shelf-stable items. Through manufacturing facilities located across North America and international markets, Hormel Foods supplies retail grocers, foodservice operators, convenience stores and e-commerce platforms.

Among its best-known brands, Hormel Foods produces SPAM® canned meats, Jennie-O® turkey products, Skippy® peanut butter and Applegate® natural and organic meats.

The article “Hormel Foods Q1 Earnings Call Highlights” was originally published by MarketBeat.