Hormel Foods Corporation today reported its performance for the fiscal year 2014 first quarter. All comparisons are to the first quarter of fiscal 2013.
The company reported fiscal 2014 first quarter net earnings of $153.3 million, up 18 percent from net earnings of $129.7 million a year earlier. Diluted earnings per share for the quarter were $0.57, up 19 percent compared to $0.48 last year. Sales for the quarter were $2.2 billion, up 6 percent from the same period in fiscal 2013.
COMMENTARY
"We achieved excellent results in the first quarter, posting an earnings per share increase of 19 percent over last year, with sales up 6 percent. Four of our five segments generated growth in sales and operating profits as we continue to deliver quality products with trusted brands to our customers and consumers," said Jeffrey M. Ettinger, chairman of the board, president and chief
executive officer.
"Our recently acquired SKIPPY® peanut butter business was a strong contributor to our Grocery Products segment results this quarter. Our Refrigerated Foods segment benefited from strong demand for our products and positive pork operating margins," commented Ettinger. "While our Jennie-O Turkey Store segment experienced more favorable feed costs this quarter, the savings
were offset by weaker live production performance driven by extreme, sustained cold weather. Our International & Other segment registered excellent sales and earnings growth led by export sales of our SPAM® family of products and SKIPPY® peanut butter products. As anticipated, our Specialty Foods team was unable to post increases this quarter as it rebuilds its product
portfolio."
SEGMENT OPERATING HIGHLIGHTS - FIRST QUARTER
Grocery Products (18% of Net Sales, 23% of Total Segment Operating Profit)
Despite higher beef and pork input costs compressing the margins of many core products, Grocery Products segment profit increased 13 percent. Sales were up 20 percent this quarter, aided by the addition of the SKIPPY® peanut butter line of products and increases in HORMEL® bacon toppings, HORMEL® chili and the HERDEZ® line of products within our MegaMex Foods joint venture. Sales of our SPAM® family of products and HORMEL® COMPLEATS® microwave meals were soft this quarter.
Refrigerated Foods (50% of Net Sales, 35% of Total Segment Operating Profit)
Refrigerated Foods delivered excellent results this quarter, with segment profit up 59 percent, driven by higher pork operating margins, continued strong demand for our bacon products, and growth in our foodservice business. Sales for the quarter were up 6 percent, led by retail sales of BLACK LABEL® bacon items, HORMEL® REV® snack wraps, and LLOYDS® ribs along with foodservice sales of HORMEL® FIRE BRAISEDTM meats and OLD SMOKEHOUSE® Pecanwood Smoked Bacon.
Jennie-O Turkey Store (18% of Net Sales, 24% of Total Segment Operating Profit)
The Jennie-O Turkey Store segment made additional investments in its brand this quarter, kicking off a new MAKE THE SWITCH® media campaign in January featuring lean ground turkey. Sales for the quarter increased 2 percent, led by sales of JENNIE-O TURKEY STORE® fresh lean ground turkey tray packs and chubs and turkey bacon. Jennie-O Turkey Store segment profit increased 1 percent, with the benefit of lower feed costs offset by lower live production performance due to sustained, extreme cold weather.
Specialty Foods (9% of Net Sales, 9% of Total Segment Operating Profit)
The Specialty Foods segment posted operating profits 11 percent lower than last year with a 16 percent decrease in sales. Lower segment results were due to the July 2013 expiration of the agreement allowing Diamond Crystal Brands to sell certain sugar substitutes into foodservice trade channels.
International & Other (5% of Net Sales, 9% of Total Segment Operating Profit)
The International & Other segment reported strong segment profits 32 percent ahead of last year, on a sales increase of 24 percent. Results were driven by robust export sales of our SPAM® and SKIPPY® product lines.
OUTLOOK
"Our Refrigerated Foods segment has momentum heading into the second quarter as macro conditions remain favorable," said Ettinger. "Our team continues to deliver growth in our value-added businesses. We've achieved distribution gains with our new SKIPPY® peanut butter business over the past year, both in domestic and international markets, and we continue to generate growth with innovative products such as HORMEL® REV® snack wraps and HORMEL® FIRE BRAISEDTM meats."
"We are anticipating tighter pork raw material supplies over the next few months, but the overall impact to our industry remains to be seen," said Ettinger. "Unusually cold weather and higher fuel costs will continue to inflate cost of goods in our Jennie-O Turkey Store segment in the second and third quarters," commented Ettinger.
"We are pleased with the strong first quarter results achieved by our team, and expect to continue to deliver sales and earnings growth through the year. Taking all factors into consideration, we are maintaining our 2014 earnings per share guidance range of $2.17 to $2.27," concluded Ettinger.
DIVIDENDS
Effective February 14, 2014, the company paid its 342nd consecutive quarterly dividend, at the annual rate of $0.80.
