Hormel Foods Corporation Q1 FY2026 earnings call

• Started fiscal 2026 with solid results, 5th consecutive quarter of organic net sales growth, adjusted diluted earnings per share 34 cents. - Protein centric portfolio resonates with consumers and operators. - Food service and international segments had high single-digit organic net sales growth and segment profit growth, offset by retail decline. - Actions taken to strengthen business, including transform and modernize initiative, restructuring program progressing. - Announced definitive agreement to sell whole bird turkey business to Life Science Innovations, supports focus on value-added protein portfolio. - Strategic priorities including strengthening protein-powered brands, building enterprise-wide growth platforms, renewed commitment to origination, transform and modernize initiative, simplifying the company, modernizing technology and data backbone, accelerating people, capabilities, and culture with new leadership appointments.

Retail: First quarter organic volume and organic net sales declined. Branded portfolio performed fairly well but impacted by strategic exit from select non-core private label snack nut items. Food Service: Performed well with 10th consecutive quarter of organic net sales growth, broad based across channels, driven by premium prepared proteins and branded pepperoni. International: Benefited from all three go-to-market models, net sales growth driven by multinational businesses and branded exports, led by SPAM luncheon meat, strong segment profit growth.

• Reiterated adjusted full-year fiscal 2026 guidance: organic net sales growth 1%-4%, adjusted operating income growth 4%-10%, adjusted diluted earnings per share $1.43-$1.51. - Q2 expected to deliver top line growth and adjusted diluted EPS flat to slightly up compared to last year. - Pending whole bird turkey transaction expected to have minimal impact on 2026 adjusted financials, majority of whole bird sales remain part of results, impact to net sales reduced by ~$50 million, larger impact in 2027. - Expect overall commodity cost to ease in back half of fiscal 2026, beef costs remain headwind, nut costs elevated, gross margin expansion from pricing benefits, mix improvements, productivity gains from transform and modernize initiative.

Commodity input cost volatility, including beef, pork trim, nuts. Logistics expenses pressures due to freight capacity tightening, severe weather events, industry dynamics. Volatility in whole bird turkey business, including high volatility and low margins.

Q: Unpack 2Q EPS outlook, segment level expectations, logistics headwinds.

A: Jeff noted continued sequential improvement, benefit from second wave of retail pricing and SG&A actions, but watching freight costs.

Q: Rationale for whole turkey divestiture, volatility.

A: Jeff and John discussed financial side (minimal 2026 impact, high volatility, low margins) and strategic focus on value-added turkey.

Q: Retail segment details, puts and takes.

A: John discussed retail top line down 2% due to private label nut exit, branded portfolio consumption growth, commodities impact, pricing actions, focus on pricing, transform and modernize, mix.

Q: Food service volumes, pricing.

A: John said food service had 7% organic net sales growth, flat volume, pricing catching up with market movements.

Q: Retail volume decline, trajectory.

A: John said volume decline due to private label nut exit, soft consumption, pricing elasticities, but priority brands growing volumes.

Q: Profitability in retail, return to past margins.

A: John discussed pivoting brands, modernizing capabilities, investments in data, technology, analytics, e-commerce.

Q: Holberd business divestiture vs Holstone Farms, Genio portfolio percent.

A: Jeff discussed differences, Genio portfolio around $200-$275M.

Q: 2Q profit acceleration confidence, retail organic net sales exit rate.

A: Jeff said confident in sequential profit improvement, retail expected modest volume declines.

Q: Percent of profits from commodity, Genio procurement strategy post divestiture.

A: Paul said not tracked specifically, Jeff said procurement strategy mostly unchanged with minor changes from LSI contract