Hormel Foods is optimistic about its outlook for the rest of the year as it plans additional price increases to make up for some of the last quarter’s losses, the company shared in its earnings report Thursday.
The owner of Spam, Jennie-O turkey and Skippy peanut butter reported net sales of $3 billion during the period ending April 30, a decline of 3.8% from the same quarter a year earlier. Retail sales volume dropped 7.1% year-over-year. Despite its recent challenges, the company reaffirmed its goal of 1-3% sales growth in its fiscal 2023 year.
The company expects to use “targeted pricing actions” at the end of the third quarter on retail items and is continuing to assess its decisions on inflationary increases, CEO Jim Snee told Wall Street analysts.
“In addition to managing costs and driving supply chain savings through continuous improvement programs, our inflation-justified pricing actions are leading to gradual margin improvement,” he added.
Hormel’s pricing decisions come as costs continue to rise for meat and snacks, two categories where the Minnesota-based company has a large presence. On the call, Hormel’s chief financial officer Jacinth Smiley attributed the need for price hikes to higher grain and beef costs as well as cold storage constraints, even as freight truck expenses have improved.
Deanna Brady, vice president for Hormel’s retail group, told analysts that while its pricing actions are helping it manage expenses, it is being cautious about what higher costs mean for the consumer.
“We’re being extremely mindful to protect both our margins but also our relationship with... our consumers,” Brady said. “When we approach retailers with the right information that supports a price increase, we’ve been able to come to terms and move forward.”
The company said turkey volumes were hit by continued impacts from bird flu, which resulted in the death of millions of birds. Smiley said on the call the company expects a full rebound in turkey volume for its Jennie-O brand in the second half of the year.
Hormel has a vested interest in growing the presence and sales of Planters, which it spent $3.35 billion to acquire from Kraft Heinz in 2021, the largest deal in its company history.
Snee said during the last quarter, the company worked on rebuilding distribution for the peanut brand, leading to an 8% increase in shipments. One way the company is increasing momentum in the brand is through flavored offerings, such as Cinnamon Brown Sugar, Dill Pickle and Rosemary and Sea Salt cashews that debuted in May. Snee said data from the last 13 weeks showed Planters outpacing the packaged nuts and seeds category.