HRL

• Leadership Transition: Jeff Ettinger concluded his tenure as Interim CEO, praising John Ghingo’s appointment as next CEO. Ash Boomblah was announced as the incoming CFO, replacing Interim CFO Paul Kuehneman.
• Strategic Priorities: Focus on strengthening execution, realizing profitability benefits from prior actions, and fostering enterprise collaboration. The company is sharpening its portfolio by exiting sub-scale or volatile businesses (e.g., Brazil operations, whole bird turkey, private label snacks) to focus on higher-growth, higher-margin opportunities.
• Food Service Strength: Continued outperformance with broad-based growth across channels and platforms. Premium prepared proteins and branded pepperoni drove strong results, benefiting from an operator-focused model and direct sales organization.
• Retail Portfolio Shift: Deliberate exit of lower-quality lines weighed on short-term volumes. However, protein-centric brands (Genio, Applegate, Hormel Chili) gained traction. Marketing investments are shifting toward retailer media and digital channels for better targeting.
• International Repositioning: Divested Brazil operations to reduce volatility and refocus on Asia Pacific. Relocated Group VP of International to Singapore for closer market engagement. Underlying export demand remains resilient despite one-time legal entity transition impacts on SPAM exports.
• Supply Chain & Operations: Experienced incremental costs from planned inventory rebalancing, lower plant utilization, severe weather events, and turkey supply chain pressures (feed conversion/temperatures). Progress continues in formal production systems and data visibility tools.

• Fiscal 2026 Adjusted EPS: Raised and narrowed guidance to $1.45–$1.51 per share (prior range: $1.43–$1.51), representing 6%–10% year-over-year growth.
• Fiscal 2026 Organic Net Sales: Tightened guidance to 1%–2% growth (prior range: 1%–4%), reflecting current consumer conditions and portfolio shaping actions.
• Fiscal 2026 Net Sales: Expected between $12.1 billion and $12.2 billion.
• Long-Term Outlook: Confidence in delivering adjusted earnings growth consistent with or above long-term algorithm targets.

The transcript does not provide specific absolute revenue figures or percentage contribution breakdowns for each product segment (Food Service, Retail, International). Management highlights that Food Service delivered organic net sales growth for the 12th consecutive quarter with margin expansion. Retail experienced a modest top-line decline due to portfolio shaping actions and volume elasticity, though priority brands like Genio, Applegate, and Planters showed momentum. International results were noisy due to divestitures and one-time legal transitions but underlying demand remains resilient.

• Consumer Environment: Consumers remain strained by cumulative inflation and high fuel prices, leading to deliberate value-seeking behavior and price sensitivity.
• Volume Volatility: Retail volumes declined more than expected due to pricing elasticities and portfolio exits; future volumes depend on successful brand pivots.
• Input Cost Timing: While lower pork prices benefit margins long-term, short-term realization is delayed due to inventory turns and elevated beef/freight costs.
• Operational Headwinds: Elevated freight and logistics costs, temporary power outages affecting facilities, and adverse feed conversion rates in turkey production created short-term cost pressures.
• International Noise: One-time legal entity transitions and divestiture losses impacted reported results, though underlying fundamentals are viewed positively.

Q: Barclays asked about drivers behind the revised guidance, specifically why top-line guidance was narrowed while bottom-line guidance was raised. / A: Jeff Ettinger explained that top-line guidance reflects YTD +1% performance and cautious Q4 outlook. Bottom-line improvement is driven by disciplined SG&A, mix management, and potential upside if retail volumes recover or freight costs decrease, though current volume weakness limits full capture of lower commodity input benefits.

Q: Barclays sought details on the high single-digit retail volume decline and performance of core brands. / A: John Ghingo attributed ~50% of the decline to exited businesses (whole birds, private label nuts). The remainder resulted from pricing elasticity and softness in some categories. However, priority brands like Genio, Applegate, and Planters saw mid-to-high single-digit consumption growth, indicating strong momentum in the protein-centric portfolio.

Q: Bank of America asked if delayed input cost benefits are due to slower inventory turns from weak volumes or other factors. / A: Paul Kuehneman confirmed weaker volumes slow inventory turns, delaying COGS benefits. Additionally, pork price declines started midway through the quarter, limiting immediate impact. Beef and freight costs remain elevated, offsetting some pork savings, especially in retail where pricing adjustments lag.

Q: Piper Sandler requested insights into Fiscal 2027 considerations, including input cost carryover and portfolio changes. / A: Paul Kuehneman noted strong food service momentum and favorable pork costs support investment flexibility. However, he cautioned that consumer environment will not meaningfully improve, and logistics/grain/beef costs remain pressured. Portfolio shaping (Brazil, whole bird turkey) will adjust top-line but not bottom-line results.

Q: BNT asked about the persistent consumer strain and why no improvement is expected in 2027. / A: John Ghingo stated consumers are strained by inflation and fuel costs, prioritizing value over lowest price. While food demand is resilient, behavior is volatile. Hormel is positioned well with convenient, affordable protein options. He anticipates continued choppy conditions in 2027, requiring adaptive marketing and channel strategies.