Hormel Foods delivers record sales in third quarter, advances Planters integration

Austin, MIN-based Hormel Foods Corp. (NYSE: HRL), the maker of Spam, Skippy peanut butter, Corn Nuts and Wholly Guacamole, among many other leading brands, reported strong sales results, up 20%, for its fiscal 2021 third quarter.

"Our team delivered the highest quarterly net sales result in the company's history, with growth from every segment and all four channels," said Hormel president and chief executive Jim Snee. "This record performance demonstrates the power of our brands and our team's ability to successfully integrate the Planters business, which is quite an accomplishment, given the difficult operating conditions again this quarter."

KEY POINTS

• Volume of 1.2 billion lbs., up 1%; organic volume1 down 2%.
• Record net sales of $2.9 billion, up 20%; organic net sales1 up 14%.
• Net sales growth from all four segments and all four sales channels.
• Net sales up 25% compared to 2019 pre-pandemic levels.
• Operating income of $207 million, down 17%; adjusted operating income1 of $248 million, down 1%.
• Operating margin of 7.2%, compared with 10.5% last year; adjusted operating margin1 of 8.7%.
• Effective tax rate of 13.3%, compared to 21.6% last year.
• Diluted earnings per share of $0.32, down 14% compared with last year; adjusted diluted earnings per share of $0.39, up 5% compared to last year.

"Our investments in retail, deli and e-commerce helped carry us through the initial phases of the pandemic last year as consumers shifted to more at-home eating occasions," Snee said. "Today, our leadership positions in foodservice and snacking have fueled an acceleration in growth as consumers pivot to spending more time in restaurants, traveling, and hosting gatherings with family and friends."

OUTLOOK

"We expect to deliver record sales again in the fourth quarter, along with improving margins as additional pricing actions go into effect," Snee reported.

"The combination of a balanced and diversified portfolio, numerous strategic investments and the addition of the Planters brand leaves us very optimistic about our future," the chief executive added.

PLANTERS UPDATE

In June 2021, Hormel closed on the acquisition of the Planters snack nuts business. Since closing, the company has integrated numerous functions. During the third quarter, the food giant recognized in excess of $40 million in acquisition costs and accounting adjustments related to the acquisition.

CHANNEL HIGHLIGHTS

In an effort to add an increased level of disclosure and clarity to sales trends compared to the prior year and pre-pandemic levels, net sales have been disaggregated into sales channels.

Demand for the company's retail items remained elevated, as exhibited by growth compared with the prior year and double-digit growth over fiscal 2019.

Foodservice sales continued to exceed pre-pandemic levels and accelerated compared to the second quarter of fiscal 2021. In separate interviews, Snee told business media that Hormel's foodservice business, which serves the restaurant industry, surged 45% over last year's pandemic-generated quiet during the summer quarter.

Additionally, deli channel sales increased due to growth from branded grab-and-go and prepared foods items.

The company also benefited from pricing actions across many categories and the contributions from the Planters snack nuts business during the quarter. Not unlike many food companies, Hormel jacked up prices on its food items this spring to offset supply inflation. More price increases are expected in its fourth quarter.