Hormel heralds progress on turnaround plan

Hormel Foods notched an early victory one year into the company’s three-year transformation plan, overcoming sales declines with a 13% profit boost to end 2024.

“Year one of ‘Transform and Modernize’ was a success, delivering $75 million in benefits,” Chief Financial Officer Jacinth Smiley said on a call with analysts Wednesday. “This is not just a cost-saving initiative. We are making foundational investments in data and technology and people and processes to transform our company.”

After years of hit-or-miss earnings and stagnant sales, CEO Jim Snee said the company is ready to “regain historical, predictable earnings growth and drive long-term value.”

“We’re on the right track, and that success is breeding momentum that leads into 2025 and our positive outlook,” Snee said in an interview Wednesday. “There’s a lot to like about where we are at.”

The long-term goal of the plan — which Snee called “the most transformative initiative in our company’s history” — is to see sales consistently grow at least 1% to 3% annually and increase earnings 5% to 7%, he said.

Hormel’s vice president of corporate development, Nathan Annis, said Wednesday one of the ways the company accomplishes that is by “reducing complexity and pruning unprofitable [products] to make room for innovation.”

The mix of cost-cutting and investments in manufacturing, distribution and digital capabilities is slated to add $250 million to operating income by 2026.

Smiley said that while other companies lay off workers and reorganize, Hormel has “a real rigor” around managing costs that is minimizing disruption.

In the quarter that ended in October, the Austin, Minn.-based company boosted profits even as revenue declined and Hormel sold less food than the year before. Profits were $220 million. Sales were $3.1 billion, down about 2%.

Executives pointed out the company overcame a Planters production disruption and a depressed whole turkey market on the way to record cash flow.

“We’re entering 2025 with momentum,” Snee said. “There are a lot of things to feel good about and that we’re excited about.”

Investors were less thrilled, even though earnings met Wall Street expectations and sales missed by a hair. Hormel’s stock rose half a percent Wednesday to close at $32 per share.

The company saw strong growth in Black Label bacon, Spam, Applegate and Jennie-O ground turkey this fall, but lackluster results for Planters and other brands.

For the full fiscal year, Hormel had $11.9 billion in revenue, a 1.6% decline, and an $805 million profit, a 1.5% increase. The company expects sales to increase 1% to 3% and the bottom line to grow up to 12% next year.

JP Morgan analyst Ken Goldman said next year will be stronger for Hormel as whole turkey prices rise, Planters production gets back on track and the Transform and Modernize initiative adds another projected $100 million to $150 million in operating income.

“We like how the business is going in terms of what management can control,” Goldman wrote.

Consumers are still grappling with high food costs, which is hurting demand. Hormel plans to nudge customers toward Planters, Hormel chili, Herdez salsa and other products early next year in “the biggest integrated promotion we’ve ever done,” Snee said.

While not a blockbuster Super Bowl ad, the campaign is a partnership with ESPN and will cover the weeks before and after the big game.

“’Here For The Snacks’ brings all our snacking and entertaining brands together,” Snee said. “Already the acceptance we’ve had from retailers is exciting.”

Smiley said consumers “will definitely see us showing up differently than we have done before.”