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Hormel Foods(HRL) - 2025 Q2 - Earnings Call Transcript
HRLHormel Foods(HRL)2025-05-29 14:00

Financial Data and Key Metrics Changes - The company reported net sales of 2.9billionforthesecondquarter,reflectinga12.9 billion for the second quarter, reflecting a 1% organic increase compared to the previous year [25] - Gross profit margin was 16.7%, impacted by higher commodity input costs, partially offset by savings from the Transform and Modernize initiative [26] - Diluted earnings per share were 0.33, with adjusted diluted earnings per share at 0.35,aligningwithexpectations[28]−Thecompanyanticipatesfull−yearnetsalesgrowthof20.35, aligning with expectations [28] - The company anticipates full-year net sales growth of 2% to 3% and adjusted diluted earnings per share in the range of 1.58 to 1.68[19][34]BusinessLineDataandKeyMetricsChanges−Theretailsegmentmaintainedleadershippositions,withnotablegrowthfromtheApplegatebrandandJennieOleangroundturkey[6][8]−Thefoodservicebusinessoutperformedthebroaderindustry,withstrongvolumeandnetsalesgrowthfrombrandedproducts[11]−Theinternationalbusinesssawdouble−digitvolumeandnetsalesgrowth,particularlyinexportsandChina[13]MarketDataandKeyMetricsChanges−Thecompanyexperiencedstrongtop−linegrowthinChina,drivenbycustomeranddistributionexpansions[13]−Thefoodservicesegmentisexpectedtoachievemid−single−digitgrowthinorganicnetsales,outperformingindustrytrends[60]CompanyStrategyandDevelopmentDirection−Thecompanyisfocusedondeliveringprofitableandpredictablegrowthwhilenavigatingadynamicoperatingenvironment[6]−TheTransformandModernizeinitiativeiscriticalforrestoringhistoricalearningsgrowthandisontracktodeliverexpectedbenefits[29]−Thecompanyplanstoincreaseadvertisinginvestmentssignificantlyinthesecondhalfoftheyeartosupportbrandgrowth[46]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedconfidenceintheabilitytodeliverstrongsecond−halfresults,supportedbyadiversifiedportfolioandstrategicinitiatives[14][19]−Theconsumersentimentisdescribedasstrainedduetoinflationanduncertaintyinthemacroenvironment[104]−Thecompanyremainscommittedtolong−termgrowthdespitechallengesintheoperatingenvironment[20][103]OtherImportantInformation−Thecompanyannouncedleadershipchanges,includingtheappointmentofKevinMyerstoleadsupplychaineffortsandtheretirementofScottOkri[20][22]−Capitalexpendituresforfiscal2025areexpectedtobebetween1.68 [19][34] Business Line Data and Key Metrics Changes - The retail segment maintained leadership positions, with notable growth from the Applegate brand and Jennie O lean ground turkey [6][8] - The food service business outperformed the broader industry, with strong volume and net sales growth from branded products [11] - The international business saw double-digit volume and net sales growth, particularly in exports and China [13] Market Data and Key Metrics Changes - The company experienced strong top-line growth in China, driven by customer and distribution expansions [13] - The food service segment is expected to achieve mid-single-digit growth in organic net sales, outperforming industry trends [60] Company Strategy and Development Direction - The company is focused on delivering profitable and predictable growth while navigating a dynamic operating environment [6] - The Transform and Modernize initiative is critical for restoring historical earnings growth and is on track to deliver expected benefits [29] - The company plans to increase advertising investments significantly in the second half of the year to support brand growth [46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to deliver strong second-half results, supported by a diversified portfolio and strategic initiatives [14][19] - The consumer sentiment is described as strained due to inflation and uncertainty in the macro environment [104] - The company remains committed to long-term growth despite challenges in the operating environment [20][103] Other Important Information - The company announced leadership changes, including the appointment of Kevin Myers to lead supply chain efforts and the retirement of Scott Okri [20][22] - Capital expenditures for fiscal 2025 are expected to be between 275 million and $300 million, focusing on capacity and technology investments [28] Q&A Session Summary Question: Can you help bridge the operating income outlook for the year? - Management highlighted strong positioning for the second half, with positive momentum in the Planters brand and value-added turkey [42][44] Question: What are the expectations for Turkey cadence in the back half? - Management noted a tightening supply in the turkey market but expressed confidence in their position and ability to capture upside during the fresh season [52][55] Question: Can you provide details on T and M savings? - Management confirmed that 66 projects were executed under the Transform and Modernize initiative, focusing on efficiency and logistics [67][70] Question: What products are related to the inventory build for summer demand? - The inventory build is strategically aligned with upcoming summer demands, particularly for Planters and promotional products [73][75] Question: How is the Planters brand expected to perform in the second half? - Management expressed optimism about the Planters brand, expecting continued sequential improvement and positive year-over-year consumption [82][84]