In a release dated August 31st Hormel Foods (HRL) reported on the third quarter of fiscal 2023 ending July 30th 2023, disappointing on both the top and bottom lines. For the quarter the company earned a reported $162.7 million on revenue of $2,963 million (consensus of $3,100 million) with a diluted EPS of $0.30. Comparable values for Q3 of fiscal 2022 ending July 31st were net income of $218.9 million on revenue of $3,034 million with a diluted EPS of $0.40.
Compared to Q3 of FY 2022 sales declined by 2.3 percent, gross margin increased from 16.6 percent to 16.8 percent; operating margin was down from 9.6 percent to 7.3 percent. Profit margin fell from 7.2 percent to 5.5 percent for the most recent quarter.
Effective October 2022, Hormel reorganized their operating divisions into Retail, Food Service and International. The Jennie-O Turkey Store Division was integrated among the new three operating divisions. Accordingly, releases for Fiscal 2023 do not disclose either volume or cost data for this subsidiary as in previous years. In reviewing the release, there was only indirect comment on the turkey business noting lower volume despite recovery from the 2022 highly pathogenic avian influenza epornitic.
Segment performance in both sales and operating profit for the most recent quarter was compared with the corresponding period in FY 2022:-
- Retail Segment volume +0.8%: sales -1.7%: segment profit -7.3%.
- Food Service Segment volume +2.1%: sales -2.9%: segment profit +13.6%.
- International Segment volume 10.4%: sales -6.0%: segment profit -50%
In commenting on Hormel results Jim Snee, Chairman, president and CEO stated “Our third quarter results reflect the strength of our leading brands, the value of our balanced business model and our team's commitment to improving our performance," He added "In an increasingly dynamic and competitive environment, we grew volume across all our segments, delivered adjusted net earnings per share in line with last year and made further progress addressing the near-term challenges impacting the business. This progress included reducing inventory, building momentum in the Planters® snack nuts business and driving adjusted operating margin improvement compared to last year."
Snee concluded, “Our Foodservice segment delivered another quarter of strong bottom-line growth, and the Retail segment delivered margins ahead of our expectations. Earnings growth from our U.S. businesses in aggregate was more than offset by significantly weaker-than-expected results in our International segment, supply chain disruption caused by a third-party logistics provider shutdown and an adverse arbitration ruling."
The company guided lower with a negative 4.0 percent to neutral decline in net sales growth compared to FY2022 and full year diluted net earnings per share to attain $1.51 to $1.57, down over a range of 11 to 14 percent.
Hormel Foods posted total assets of $13,427 million on July 30th 2023 of which $6,722 comprised goodwill and intangibles. Long-term debt was $2,524 against an intraday market capitalization of $21,080 million on September 1st. HRL has traded over the past 52 weeks in a range of $37.79 to $49.73 with a 50-day moving average of $40.04. HRL trades with a forward P/E of 21.5. HRL closed at $39.08 on August 30th pre-release. The share price closed at $38.50 on Thursday August 31st
The 12-month trailing operating margin is 9.8 percent with a profit margin of 7.6 percent. The Company has returned 5.7 percent on assets and 12.2 percent on equity.
Subscribers can review the financial performance of competitor Butterball by entering “Seaboard” into the SEARCH tab.