Hormel Foods expects second-half growth to accelerate although guidance for sales and EPS was tweaked to reflect the macroenvironment.
“We anticipate strong second-half growth,” president and CEO James Snee told analysts yesterday (29 May) after reporting organic sales increased 1% in the first six months of the year to $5.9bn.
“While the macroenvironment is ever-changing, our strategy is consistent and clear. Our top-line momentum is building, our diversified portfolio allows us to navigate changing preferences and trends, and we are on track to deliver the benefits of our transform and modernise initiative, positioning us to regain our long-term growth trajectory.”
Despite a decline in first-half operating income, Snee is confident in meeting the Spam brand owner’s target of adding at least $250m to growth for that metric in the next financial year, fiscal 2026.
“At this point, nothing has changed. While we want to get to 2026, obviously our focus right now is on 2025 and all of the work that’s happening here,” Snee said during yesterday’s Q&A session with analysts.
Operating income in the six months to 27 April dropped 11% to $477m and declined 9% on an adjusted basis to $519m.
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By GlobalDataHowever, Snee added: “In the face of an evolving backdrop, we are responsibly narrowing our fiscal 2025 outlook, which remains largely unchanged.”
Finance chief Jacinth Smiley put the adjusted outlook into the context of tariffs and the current operating environment.
“The global environment remains dynamic and ever changing. Although our business has not been materially impacted by the tariff landscape to date, based on what we know today, we have assumed a range of $0.01 to $0.02 of tariff impacts in the back half of the year in our outlook,” she explained.
Diluted earnings per share are now expected in a range of $1.49 to $1.59 for fiscal 2025 versus the $1.49-1.63 guidance provided at the first-quarter stage in February.
On an adjusted basis, diluted EPS is now seen at $1.58-1.68, compared to $1.58-1.72 previously.
Sales meanwhile are envisaged at $12-12.2bn, a slight tick-up on the bottom-end from $11.9-12.2bn. That implies growth of 2% to 3% compared to the February guide of 1% to 3%.
“This year is a story of momentum. We expect half-one and half-two results will look very different. What will not be different, however, is our strategy, as we have intentionally structured our business to balance changes in the marketplace,” Snee said.
Hormel Foods said it closed one of its three dry sausage production facilities in California during the quarter and transferred production to other facilities, which Smiley said was “part of our ongoing efforts to future fit our supply chain”, adding that “one of our priorities has been to increase efficiencies in our production processes”.
Snee provided some insight into the consumer environment and purchasing behaviour in light of the current economic climate.
General speaking, he said: “I would describe the consumer sentiment as not great, meaning they’re feeling the cumulative effects of inflation and at the same time feeling uncertainty in the macroenvironment. I would describe that as a strained consumer sentiment.
“What’s interesting is, you do see some trading down from consumers to lower prices. Fortunately, with our portfolio being so broad, we do offer products at all different pricing tiers, including more value-oriented options.”
Snee added: “Some of our categories actually play very well for affordability. There is some trading down, but for the most part, consumers are looking for value and protein. We feel really good about our protein-centric portfolio being able to meet their needs for the value they’re looking for.”
