Hormel Foods Corp. reported lackluster financial results Tuesday on weakness in its food-service business due to shuttered restaurants and cafeterias related to COVID-19.
The Austin, Minn.-based food company missed earnings expectations and delivered an unforeseen revenue decline in its fiscal 2020 fourth quarter, which ended Oct. 25.
Like the rest of the meat industry, Hormel continued to grapple with the increased production costs and threat to worker health caused by the pandemic. At the same time, Hormel executives said the latest shutdowns across the United States won’t be as jarring for the food industry as those in the spring.
“We do not expect there to be the same level of chaos as there was nine months ago,” said Jim Snee, chief executive of Hormel. “As you think back on 2020, our experienced team managed through a lot of rapid and unpredictable changes … we have gained an understanding on how to appropriately operate in this environment.”
Heading into Thanksgiving, the company’s Jennie-O Turkey Store unit, based in Willmar, has been hit hard by K-12 school closures, which it relies on for significant sales.
Jennie-O is one of Hormel’s vertically integrated supply chains and has had several setbacks in recent years, from avian flu to product recalls, that now include a global pandemic. Like many meatpackers, Jennie-O’s turkey slaughter and processing facilities dealt with virus outbreaks among its workers that slowed down production.
But the latest results don’t capture what is expected to be an unusual and unpredictable Thanksgiving season for the second-largest turkey company in America.
Profit fell in the quarter to $234.4 million, or 43 cents per share, missing the consensus among 11 analysts polled by Refinitiv, formerly the Thomson Reuters Financial and Risk unit, by a penny. Revenue also declined 3% to $2.4 billion.
Hormel has witnessed dramatic declines in sales to restaurants, schools and institutions that have been closed or restricted by the pandemic. For the quarter, food-service revenue dropped 23% while revenue at groceries and other retailers rose 7%.
“Even though on-premise dining is being restricted again in many states, operators are better prepared to effectively manage pickup and delivery,” Snee said of this new wave of dining restrictions.
While the fourth quarter fell short, Hormel reported record annual revenue for the 2020 fiscal year of $9.6 billion, a rise of 1%.
“This year certainly challenged our balanced business model,” Snee said. “Never could we have imagined how it unfolded.”
Every week, Snee said, it felt like the company was having to navigate a “raw material, ingredient or packaging component shortage.”
Hormel also announced a dividend increase of 5% Tuesday, bringing it to 98 cents per share.
The company’s stock fell 5.6%.