Hormel Foods Q3 sales surge driven by a rebounding foodservice sector

USA – American food company Hormel Foods has seen Q3 sales surge mainly driven by a rebounding foodservice business which delivered a 45% rise in sales when compared to the same period last year.  

According to the financial results of the Minnesota-based company, sales for the quarter rose sharply to US$2.86 billion from US$2.38 billion the year prior. 

The sales surge was attributed to consumer demand across the company’s portfolio as sales rose in all four business units, pricing actions on almost every brand, and several weeks operating the recently acquired Planters business. 

“Now more than ever, our investments across all areas of our business are paying off and have allowed us to reach even more consumers when and where they are eating,” said James P. Snee, chairman, president and chief executive officer. 

“Whether it is cooking a meal at home, snacking at work, eating at a local restaurant, hosting a gathering with family and friends or ordering food online, a Hormel Foods branded product will likely be an option.” 

Net income for the quarter ended July 25 was US$177 million, equal to 33¢ per share on the common stock, and down from the previous year when the company earned US$203 million, or 38¢ per share. 

The drop in income was attributed to rising input costs related to raw materials, freight, supplies and labor. Most notably high hog prices reverberated throughout the company’s product portfolio. 

“Hog prices were up 250% compared to 20-year lows last year,” said James N. Sheehan, chief financial officer.  

“Additionally, the prices of pork remained elevated, caused by the recovery in the foodservice and the strong worldwide demand.” 

A shortage of workers added to Hormel Food’s woes as it prevented the company from meeting demand in some product categories. 

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“The pressure on the gross margin really relates to the labor shortages, not only labor shortages at our facilities but labor shortages throughout the supply chain,” Mr. Sheehan said.  

“At times, we’ve had lines that have not been running at full capacity that have created some overheads because we’ve had shortages in our plants. At other times, we’ve been notified, let’s say, relatively late that our suppliers could not provide us either packaging or input into our products.” 

Moving into Q4, Hormel Foods forecasts full-year sales to be between US$11 billion and US$11.2 billion, and that diluted earnings per share will fall in a range between $1.65 and $1.69. 

“This guidance reflects the addition of the Planters business and includes the associated onetime transaction costs and accounting adjustments in addition to the impact from inflationary pressures on our business,” Mr. Snee said.  

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