Planters, pricing, promotion give Hormel another record quarter

Hormel Foods had a hearty holiday performance on the back of price increases, the Planters integration and increased advertising.

The company's profit rose 7.8% in its first fiscal quarter, which runs November through January, as sales grew 24% to pass $3 billion. About half of Hormel's sales growth was due to its purchase of the Planters snack-nut business.

The strong performance came despite the impact of the latest variant of the coronavirus on its workers and suppliers.

"From late December through January, our operations were heavily impacted by significant labor shortages due to the omicron variant," Hormel chief executive Jim Snee said Tuesday.

Hormel said it earned $239.5 million, or 44 cents a diluted share, in the three months ended Jan. 30. That's up from $222.4 million, or 41 cents a share, in the same period a year earlier.

The results beat expectations. Hormel's stock rose 4% Tuesday to close at $49.54, not far from a 52-week high.

The company's recent price increases are starting to catch up with "the dramatic inflation we have seen in the past year," Jacinth Smiley, Hormel's chief financial officer, said.

Snee also said further price increases are planned this year.

"Product price increases, good new product innovations and prudent cost control seem to be offsetting higher inflation and supply-chain issues," John Boylan, analyst at Edward Jones, wrote in a note to investors after the Hormel announcement.

"We are watching closely to see whether higher overall grocery bills cause consumers to explore lower-cost forms of protein if inflation continues," Boylan said.

In the just-ended quarter, Hormel's sales of grocery products, which include Spam and Planters, increased 48% to $856 million, almost all due to Planters. Excluding that business, Hormel's grocery product sales saw 7% growth.

Refrigerated foods, like bacon and charcuterie products, saw sales jump 19% to $1.6 billion.

Jennie-O saw a 15% boost in sales and 62% jump in operating profit due to better whole-bird sales over the holidays and a rebound in sales to restaurants and schools.

Hormel announced last fall it would be consolidating Jennie-O operations in Willmar, Minn., and closing one of its plants there to improve the turkey brand's profitability.

"This is going to be a demand-oriented business that will have less volatile earnings over time," Snee told investors.

The company said plans are on track for the Benson Avenue plant in Willmar to close this spring but that it would use the former Jennie-O space for "other high-growth items in the Hormel Foods portfolio."