Hormel braces for bird flu impact on Jennie-O business, plans more price hikes

Hormel Foods Corp. said the bird flu outbreak will cause "large supply gaps" for the Jennie-O turkey brand this year.

"Our Jennie-O Turkey Store team is facing an uncertain period ahead," Hormel CEO Jim Snee said. "Similar to what we experienced in 2015, [bird flu] is expected to have a meaningful impact on poultry supplies over the coming months."

The bird flu didn't ding Jennie-O sales in the company's second-quarter earnings reported Thursday. The turkey brand's sales for the quarter were up 16% year over year and reached $407 million.

But the quarter ended in April before the effects were felt in the worst outbreak of highly pathogenic bird flu since 2015. The outbreak this spring has claimed the lives of 38 million birds in 35 states, including several million in Minnesota, which leads the nation in turkey production.

The spread has slowed substantially in the past month, however, as less than 1 million birds were affected nationwide in May, according to the U.S. Department of Agriculture.

Minnesota has seen 2.9 million birds, mostly turkeys, killed by the virus or depopulated to prevent its spread. But just 180,000 were reported in May.

"We've started some re-population," Snee said. "Assuming we don't have any more outbreaks from this event, or we don't see a recurrence in the fall, we expect to have more traditional volumes available" in time for Thanksgiving.

Hormel's stock price fell more than 5% on Thursday, closing at $45.76, its lowest point this year.

The food company, based in Austin, Minn., reported a $261 million profit for its second fiscal quarter, which ran February through April, marking a 14% jump over a year ago. Hormel tallied earnings per share of 48 cents, beating analyst predictions.

Sales reached $3.1 billion in the quarter, up 19% over the year before, or 10% excluding acquisitions. Growth was driven by the Planters, Skippy, Wholly Guacamole, Spam and Columbus brands and higher demand from restaurants and schools.

Hormel's refrigerated foods segment saw sales rise 13%, to $1.6 billion. Shelf-stable grocery sales rose 39% to $873 million, largely due to the Planters acquisition that closed last summer; sales growth excluding the snack brand was 7%.

International sales were hit by export challenges, dropping 1.4% to $171 million, though China's COVID-19 lockdown boosted Hormel's in-country sales as residents stocked their pantries to stay at home.

Hormel has raised its prices to help offset the higher cost of doing business. The company said it expects to implement more price increases this summer.

Prices have gone up for Spam due to increased costs for protein and packaging, and Wholly Guacamole has passed on higher avocado prices, Snee said. Skippy peanut butter has been "least impacted" by cost pressures, he said.

"We are very, very thoughtful about the managing of our pricing and our promotions to ensure the long-term health of our business," Snee said. "We always take the long-term view."