Hormel Foods Earns 42 Cents per Share

This morning, Hormel Foods (HRL) reported fiscal Q2 earnings. It was a tough quarter for the Spam folks. Organic sales rose 6% but EPS fell to 42 cents. The latter matched Wall Street’s consensus.

Hormel has withdrawn its guidance. For Q2, the company’s operating margin fell from 13.3% to 12.1%. That’s not a good sign.

Hormel said it absorbed about $20 million in “incremental supply chain costs,” including employee bonuses and more cleaning expenses. Comparable sales volumes increased by 7%.

“Our financial results this quarter demonstrate the value of our balanced business model and our team’s ability to react to a rapidly changing environment,” Snee said. “We continue to excel and gain market share in channels that are open and available to us, namely the retail channel. We know consumers are looking for trusted brands, and we will continue investing in our leading brands such as SPAM®, SKIPPY®, Jennie-O®, Hormel® Natural Choice® and Applegate®. Our strong balance sheet and stable cash flows give us the confidence to lean into our business and make the right long-term decisions for our team members, suppliers, customers and shareholders. Even though the COVID-19 pandemic has caused a dramatic shift in consumer behavior, operational disruptions and extreme volatility in raw material markets, we remain financially strong and well-positioned to weather the pandemic.”

Here’s the breakdown by segment:

Refrigerated Foods
Segment profit down 17%
Organic volume down 1%

Grocery Products
Segment profit up 22%
Organic volume up 19%

Jennie-O Turkey Store
Segment profit up 54%
Volume up 19%

International & Other
Organic volume down 1%
Segment profit up 62%

Hormel currently has over $600 million cash on hand. The company is in a strong financial position with limited debt and consistent cash flows. Total debt is $315 million, up from $250 million at the beginning of the year.

Posted by on May 21st, 2020 at 1:58 pm


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