Hormel shut down a major Planters manufacturing facility in Virginia for five weeks this spring after recalling its nuts for potential listeria contamination. The outage kept its peanuts off some store shelves and crushed the brand’s momentum.
Planters nuts recall dims Hormel’s outlook
Planters disruption, low turkey prices and pockets of weak demand are dragging the Minnesota company’s sales.
The Minnesota Star Tribune
September 4, 2024 at 9:40PM
Suddenly, Hormel’s prized $3.3 billion acquisition is weighing the company down. But company leaders say Planters will bounce back.
“It was hitting on all cylinders, when we think about distribution gains, innovation gains, connecting with younger retail consumers,” said Hormel CEO Jim Snee. “We’ll be able to get back on track to deliver on that original thesis.”
Still, the Austin, Minn.-based food company will finish the year with less money in the bank than planned as a result of the plant shutdown and a host of other issues.
Investors sent Hormel’s stock down 6% Wednesday as the maker of Spam, Skippy and Dinty Moore beef stew lowered its annual revenue forecast by $400 million.
No illnesses were linked to the Planters recall.
“We did significant due diligence and thought we were in a good position” after buying the brand in 2021, Snee said. “While we can talk about the financial impact, the fact is our system worked.”
The foodborne pathogen can have serious consequences. A listeria outbreak linked to Boar’s Head deli meats has killed nine people this summer.
Hormel settled a safety citation from OSHA last fall for $3,300 and also incurred a citation but no fine for a health violation this spring at the plant in Suffolk, Va.
Bringing the Planters facility back online has taken longer than expected, Snee said, adding to the financial drain that is expected to knock out 6 cents per share of profit this year.
Meanwhile, turkey prices have bottomed out, and the company is selling “significantly” fewer Jennie-O turkeys compared to last year.
While that might mean great deals for shoppers for Thanksgiving, it leaves Hormel in a lurch.
Snee said “commodity market conditions” in general, including fresh pork prices, are denting sales. Improved sales from branded and processed offerings, like ground turkey, Black Label bacon and Wholly Guacamole, couldn’t offset the commodity crunch.
“Many of our key retail brands are growing, outperforming their categories and, most importantly, resonating with our customers and consumers,” Snee said.
Retail sales dropped 7% in the company’s third quarter, which ended in July, and the volume of food sold in stores fell 9% compared to the same period last year.
The volume decline was “worse than expected in all segments,” wrote Piper Sandler analyst Michael Lavery.
CFRA analyst Arun Sundaram predicts 2025 “should turn out to be a stronger year” for Hormel. The company is on a multi-year plan to “transform and modernize” operations and aims to grow operating income $250 million by 2026.
In total, Hormel’s revenue fell 2% to $2.9 billion in the third quarter and profits rose 8% to $176 million or 32 cents per share.
Company has little competition in some emerging markets
