Hormel Foods Tightens Annual Profit Forecast as Weak Retail Demand Weighs on Outlook

Austin, Minn. — May 29, 2024

Hormel Foods Corp., the multinational maker of Spam, Skippy, and other household staples, revised its full-year profit outlook Wednesday, narrowing its earnings forecast as slumping retail demand and shifting consumer habits weigh on the company’s bottom line.

Revised Forecast Reflects Retail Headwinds

Hormel Foods (NYSE: HRL) now expects its fiscal 2024 adjusted earnings to land between $1.55 and $1.65 per share, compared to its prior estimate of $1.51 to $1.65 per share. While the midpoint edges slightly higher, the tightened range reflects “persistent softness” in demand for branded grocery items, according to comments from Hormel’s executive team during its quarterly earnings call.

“Our business continues to face a challenging retail backdrop, with consumers showing greater sensitivity to pricing,” Chief Executive Jim Snee said Wednesday. “We’re leaning into cost controls and focusing on emerging foodservice opportunities to help offset weak grocery sales in the near-term.”

Analysts had been watching Hormel for further signals after similar warnings from other consumer packaged goods companies about slow-moving inventories and changing shopping patterns. U.S. consumers, pressured by inflationary headwinds and higher interest rates, have increasingly shifted toward value-driven options and private-label brands—trends that have impacted sales for established names like Spam, Skippy, and Jennie-O.

Mixed Performance Across Hormel’s Segments

The Minnesota-based food manufacturer reported net sales of $2.89 billion for the second fiscal quarter ended April 28, 2024, relatively flat compared to the same period last year. Net earnings were $209.7 million, down 2% year-over-year, as Hormel grappled with higher input costs and a tougher retail environment.

Breaking out the results by business segment revealed contrasts:

• Retail: Hormel’s largest division, accounting for the bulk of its sales, posted weaker volumes for core packaged meats and canned products. Snee attributed this to “category-wide softness” and heightened price sensitivity among shoppers.
  
• Foodservice: This division continued to post solid growth, as restaurants and institutional buyers ordered more Hormel products to meet rising out-of-home dining demand.
  
• International: Revenue growth here remained modest, with exports of Spam and other products to Asian markets impacted by lingering currency pressures and lackluster global demand.

Industry Pressures Shape Strategic Response

The broader food industry has seen similar dynamics in recent months. Companies such as Kraft Heinz and Campbell Soup have likewise warned of volume declines in retail aisles, even as cost savings efforts and product innovation help stabilize profits.

Hormel emphasized ongoing cost efficiencies, supply chain improvements, and targeted promotions as key levers for navigating the current retail slowdown.

“We see green shoots in foodservice and are investing in brands that connect with younger demographics,” said Snee. “Nevertheless, we are prepared for ongoing uncertainty in consumer spending for the remainder of the year.”

Market Reaction and Analyst Perspectives

Shares of Hormel Foods fell modestly in Wednesday morning trading, reflecting investor concern over sluggish retail sales. Analysts note that the company’s diversified portfolio and cautious guidance provide some reassurance, but headwinds remain.

“Hormel’s brands are household names, but the company is not immune to macroeconomic pressure,” said Bank of America analyst Bryan Spillane in a note to clients. “Until we see a turnaround in retail volumes or clearer momentum in foodservice, Hormel’s earnings growth may be constrained.”

According to Reuters, Hormel’s tightened profit forecast and measured commentary echo what is becoming a common refrain across the U.S. food landscape.

Conclusion: Hormel Navigates a Challenging Retail Landscape

As inflation continues to reshape U.S. consumer spending habits, legacy food brands like Hormel are adapting their strategies and adjusting expectations. The company’s focus on operational efficiencies and growth in foodservice offer some reason for optimism, but the uncertain retail outlook will remain a key challenge in the quarters ahead.