In a release dated November 29th Hormel Foods (HRL) reported on the fourth quarter of fiscal 2023 ending October 29th 2023, disappointing on both the top and bottom lines. For the quarter the company earned a reported (GAAP) $195.9 million on revenue of $3,198 million (Zack’s consensus of $3,260 million) with a diluted EPS of $0.36. Comparable values for Q4 of fiscal 2022 ending October 30th were net income of $279.6 million on revenue of $3,283 million with a diluted EPS of $0.51.
Compared to Q4 of FY 2022 sales declined by 2.6 percent, gross margin decreased from 17.3 percent to 16.1 percent; operating margin was down from 11.1 percent to 8.4 percent. Profit margin fell from 8.5 percent to 6.1 percent for the most recent quarter.
For FY 2023 Hormel earned $793 million on revenue of $12,110 million with a diluted EPS of $1.45. For FY 2022 Hormel earned $999 million on revenue of $12,459 million with a diluted EPS of $1.82.
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. During the analyst’s call CEO Jim Snee expressed ongoing concern for losses during November and December 2023 and for 2024.
Segment performance in both sales and operating profit for the most recent quarter was compared with Q4 FY 2022:-
- Retail Segment volume -3.0%: sales -4.0%: segment profit -4.0%.
- Food Service Segment volume +5.0%: sales +2.0%: segment profit +13.0%.
- International Segment volume 5.0%: sales -12.0%: segment profit -67.0%
In commenting on Hormel results Jim Snee, Chairman, president and CEO stated “In fiscal 2023, we achieved our second consecutive year of net sales in excess of $12 billion, continued to reinvest in the growth of our leading brands, drove strong operating cash flows of $1 billion and returned a record amount of cash to our shareholders in the form of dividends," He added "Despite challenging operating conditions to end the year, our results were in line with the low end of our revenue and adjusted net earnings per share expectations, as a strong finish from our Foodservice segment was offset by pressure in our Retail and International businesses”. Snee concluded "Looking ahead, our teams continue to navigate through a dynamic operating environment characterized by slowing consumer demand, inflationary pressures and headwinds in our turkey business”.
For FY 2024 the company projected a one to three percent increase in net sales growth compared to FY 2023 and full year diluted net earnings per share of $1.43 to $1.57.
Hormel Foods posted total assets of $13,449 million on October 29th 2023 of which $6,685 comprised goodwill and intangibles. Long-term debt was $2,549 against an intraday market capitalization of $16,700 million on December 1st. HRL has traded over the past 52 weeks in a range of $30.12 (an 8-yea
r low on October 23rd) to $47.64 with a 50-day moving average of $33.85. HRL trades with a forward P/E of 17.5. HRL closed at $39.08 on August 30th pre-release. The share price closed at $30.59 on November 30th post release.
The 12-month trailing operating margin is 9.3 percent with a profit margin of 6.6 percent. The Company has returned 4.9 percent on assets and 10.4 percent on equity.
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