Hormel Foods today (16 February) raised its forecast for annual earnings after reporting a “record” first quarter, with improved margins offsetting a drop in sales.

The US food maker lifted its guidance for 2015/2016 earnings from a range of $1.43 to $1.48 per share to $1.50 to $1.56 per share. 

President and COO James Snee said Hormel anticipates “favourable input costs” to continue for its refrigerated foods, grocery products and speciality foods. The company also anticipates its pork operating margins to moderate as the year progresses.

“As part of our efforts to drive revenue growth, we are currently investing in our brands through impactful new advertising campaigns for innovations such as our Skippy PB Bites and core items including Hormel pepperoni and Muscle Milk protein products,” added Snee.

For the first quarter, revenue fell 4% to US$2.3bn. Volume sales dropped 3%, the group revealed. Hormel attributed the decline to turkey supply constraints and lower pork pricing. 

However, profit across its grocery, refrigerated and speciality units increased 26%, 65% and 44% respectively. Expanded margins were the result of declining input costs and plant efficiency, Hormel suggested. As a result, group operating earnings rose 23% to $374.5m. Net earnings increased to $253m versus $187.3m in the comparable period of last year.

Hormel’s first-quarter results by division