Hormel Foods (HRL): Key takeaways from the Q2 2023 earnings report

Shares of Hormel Foods Corporation (NYSE: HRL) were up over 4% on Thursday, following the company’s announcement of its second quarter 2023 earnings results. Sales fell short of estimates while EPS matched expectations. The company reaffirmed its outlook for the full year. Here are the key takeaways from the earnings report:

Quarterly performance

Hormel’s net sales in Q2 2023 dropped nearly 4% year-over-year to $3 billion, missing estimates. EPS fell 17% YoY to $0.40 but came in line with expectations. Net income was down 17% to $217.2 million.

Category performance

During the second quarter, Hormel saw sales and volume decline across all its segments due to a shortage in turkey caused by avian influenza. In the Retail segment, sales fell 4% as growth from the global flavors vertical was offset by declines across other retail verticals. Even so, the company recorded gains from brands and products like SKIPPY, Hormel chili, Hormel pepperoni and WHOLLY Applegate frozen items. Although overall volume for the segment was down 7%, Planters snack nuts and Hormel Black Label bacon managed to grow volume during the quarter, with the latter seeing a 22% rise in volume.

In Foodservice, volume dipped 1% and sales fell 3% as growth in categories like sliced meats and pizza toppings was offset by the impact of lower turkey volumes and lower pricing in categories like bacon. Within International, volume was down 4% and sales were down 3% as gains from the SKIPPY and Planters brands and growth in Brazil was offset by lower commodity turkey export sales and weakness in China.

Strategic priorities

Hormel continues to grow its core brands with volume and sales growth in product lines such as Hormel Square Table entrees and Hormel Black Label bacon. It is expanding its scale in snacking with strength in the Planters brand and Columbus charcuterie tasting boards. Planters grew shipments by 8% in Q2.

The company continues to drive growth in its ethnic and Food Forward portfolios. During the quarter, it grew or maintained dollar and volume share in the salsa, sauces, and refrigerated guacamole categories within the Herdez, WHOLLY, CHI-CHI’S and Dona Maria brands. Its Applegate products grew dollar sales by 4% in Q2.

Outlook

Hormel expects to see sales and earnings growth in the second half of 2023, helped by growth in the Foodservice segment. The company expects all its segments to benefit from a pickup in turkey volumes and improved fill rates in key categories. Hormel expects net sales to grow 1-3% in FY2023 versus the prior year while EPS is projected to be $1.70-1.82.