The packaged food industry is in the doldrums, but Hormel Foods still served investors an appetizing outlook Tuesday.
The Austin-based company, maker of everything from canned chili to organic meats, topped Wall Street's fourth-quarter profit expectations. And Hormel raised the bar for its new fiscal year, forecasting profits comfortably above what stock analysts had anticipated.
Lower ingredient prices — for pork and beef, particularly — account for part of the rosier picture. Increased production efficiency does, too. And many of Hormel's products fit well into a key consumer trend: the increasing demand for protein products.
"Hormel plays into the strengths in food right now," said Brian Yarbrough, a stock analyst at Edward Jones. "They are pretty bullish when the rest of the food industry outside of natural and organics is pretty ho-hum."
Increasingly, shoppers are spending more money on the perimeter of the grocery store — home to fresh produce and meat — while focusing less on the so-called "center store," where more processed foods prevail.
Hormel's fresh meat lineup — such as bacon and turkey products — is on the perimeter. And its shelf-stable processed foods like Spam continue to sell well, anyway.
"We are in parts of the store where sales are growing, and even in the center of the store — where it is slowing — we are in pockets of growth," James Snee, Hormel's chief operating officer, said Tuesday in an interview with the Star Tribune.
Added Hormel CEO Jeffrey Ettinger: "It was actually a fantastic year for our traditional canned meat portfolio." Sales of Spam, Dinty Moore stew and Mary Kitchen hash were all up for fiscal 2015, and while chili sales were down for the year, they popped up during the fourth quarter.