Hormel Foods Corp. (NYSE: HRL) reported record performance for the fiscal year 2015 first quarter. All comparisons are to the first quarter of fiscal 2014.
- Record dollar sales of $2.4 billion, increased 7 percent; volume up 3 percent.
- Record non-GAAP adjusted diluted EPS2 of $0.69, up 21 percent from $0.57 per share, excluding previously announced, nonrecurring charges. Record GAAP diluted EPS of $0.64.
- Total non-GAAP adjusted segment operating profit increased 18 percent; GAAP total segment operating profit up 10 percent.
- Refrigerated Foods segment operating profit up 19 percent; volume down 3 percent; dollar sales up 1 percent.
- Jennie-O Turkey Store segment operating profit up 56 percent; volume up 9 percent; dollar sales up 10 percent.
- Grocery Products non-GAAP adjusted segment operating profit down 8 percent (Grocery Products GAAP segment operating profit down 27 percent including nonrecurring charges relating to closure of the Stockton, California, manufacturing facility); volume up 1 percent; dollar sales up 2 percent. Excluding net sales of MegaMex Foods products not included in the prior year, volume down 5 percent and dollar sales down 2 percent.
- Specialty Foods segment operating profit down 13 percent; volume up 17 percent; dollar sales up 34 percent. Excluding incremental sales of CytoSport Holdings Inc. products, volume down 2 percent and dollar sales up 3 percent.
- International & Other non-GAAP adjusted segment operating profit up 6 percent (International & Other GAAP segment operating profit down 36 percent including nonrecurring charges related to the exit from international joint venture businesses); volume up 12 percent; dollar sales up 17 percent. Excluding incremental sales of Skippy® peanut butter, volume up 7 percent and dollar sales up 12 percent.
Excluding nonrecurring charges, the company reported fiscal 2015 first quarter non-GAAP1 adjusted net earnings2 of $187.3 million, up 22 percent from net earnings of $153.3 million a year earlier. Non-GAAP1 adjusted diluted earnings per share2 for the quarter were $0.69, up 21 percent compared to $0.57 last year.
On a GAAP basis, the company reported fiscal 2015 first quarter net earnings of $171.7 million, up 12 percent from net earnings of $153.3 million a year earlier. Diluted earnings per share for the quarter were $0.64 this year compared to $0.57 per share last year.
Sales for the quarter were $2.4 billion, up 7 percent from the same period in fiscal 2014.
“We are off to an excellent start to our fiscal year with double-digit earnings growth and record sales in the first quarter,” said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer.
“Jennie-O Turkey Store increased operating profit by 56 percent, with strong value-added product sales growth, robust turkey markets, and favorable input costs,” remarked Ettinger. “Refrigerated Foods also turned in an excellent quarter by driving increased value-added sales, aided by the benefit of lower pork costs. Grocery Products was challenged by high input costs and soft sales on some brands, while International & Other delivered increases despite difficult export markets,” commented Ettinger. “Specialty Foods is focused on driving higher margins in the newly acquired CytoSport business, and going forward we believe the business is well positioned to deliver results in line with our expectations.”
SEGMENT OPERATING HIGHLIGHTS – FIRST QUARTER
Refrigerated Foods (48 percent of net sales, 38 percent of total segment operating profit)
Segment profit for Refrigerated Foods increased 19 percent driven by growth of value-added products and strategic margin management. Sales for the quarter were up 1 percent, with the increases led by retail sales of Hormel pepperoni and Hormel Gatherings party trays, and foodservice sales of Hormel Bacon fully cooked bacon and Hormel pizza toppings. The dissolution of the Precept Foods joint venture offset a portion of the sales increases.
Jennie-O Turkey Store (18 percent of net sales, 35 percent of total segment operating profit)
Jennie-O Turkey Store segment profit grew 56 percent in the first quarter, driven by the continued growth of value-added products and beneficial turkey commodity prices. Sales for the quarter increased 10 percent, including strong sales of Jennie-O lean ground turkey and Jennie-O rotisserie turkey.
Grocery Products (17 percent of net sales, 15 percent of total segment operating profit)
Excluding nonrecurring charges related to the closing of the Stockton, California, manufacturing facility2, Grocery Products segment profit decreased 8 percent. Segment sales were up 2 percent with the additional net sales of MegaMex Foods products not included in the prior year. Products delivering sales growth this quarter included our SPAM® family of products, as well as Herdez® salsas and sauces and Wholly Guacamole® dips in our MegaMex Foods joint venture. The segment experienced softer sales of Skippy peanut butter and Hormel chili.
Specialty Foods (11 percent of net sales, 7 percent of total segment operating profit)
Specialty Foods posted segment profits 13 percent lower than last year. The lower results were caused by reduced contract manufacturing during the quarter, offsetting incremental CytoSport results. Segment sales increased 34 percent, largely attributable to the addition of Muscle Milk® protein nutrition product sales.
International & other (6 percent of net sales, 5 percent of total segment operating profit)
Excluding nonrecurring charges related to the exit from international joint venture businesses, International & Other segment profit increased 6 percent and sales were up 17 percent. Results were driven by continued, strong growth of our China foodservice and retail businesses, which more than offset lower SPAM luncheon meat exports.
“Due to our strong performance in the first quarter, we are raising our 2015 non-GAAP adjusted earnings guidance range from $2.45 to $2.55 per share2 to $2.50 to $2.60," stated Ettinger.
“We expect our Refrigerated Foods, Jennie-O Turkey Store, and International value-added businesses to continue to drive results throughout the year, benefitting from strong demand and lower input costs. Jennie-O Turkey Store will likely experience less favorable commodity meat markets offsetting some of those gains as the year progresses,” commented Ettinger. “We look for Grocery Products and Specialty Foods to contribute to our growth goals in the back half of the year, with lower input costs, brand-building media campaigns, and innovative new products.”
“Our large portfolio of leading brands and sustained focus on innovation will allow us to build upon the momentum of our excellent start to the year,” concluded Ettinger.