Hormel Foods thankful its turkey business is back

Kristen Leigh Painter
Star Tribune

Two days before Thanksgiving, Hormel Foods Corp. is giving thanks its turkey business is back.

Hormel’s latest quarterly results, announced Tuesday, showed Jennie-O Turkey Store grew volume, sales and profit for the first time since early 2016.

Hormel headquarters in Austin, Minn.

The business, which is the nation’s second-largest turkey brand, had struggled over the last few years through challenging market conditions and two product recalls that damaged its relationship with retailers. Jennie-O recently won back space in some key retailers who had cut their distribution following two recalls of ground turkey before Thanksgiving and Christmas last year.

“We feel (Jennie-O) has so much momentum going into 2020,” Jim Snee, Hormel’s chief executive, said. “But we still have work to do to get back to our pre-recall levels.”

The company’s cautiously optimistic outlook for Jennie-O, which accounts for about 15% of Hormel’s overall sales, was a bright spot in the fiscal fourth quarter that ended Oct. 27.

Hormel’s profit fell 2% to $255 million. That amounted to 47 cents a diluted share, beating analysts’ expectations by a penny.

Revenue fell about 1%, with gains in some products offset by the impact of the sale of its CytoSport drinks to PepsiCo earlier this year.

For the new fiscal year, executives at Hormel forecast sales growth of around 4% but little change to its per-share profit. In a statement, they cited ongoing global trade uncertainty, “higher protein prices and further volatility related to the impact from African swine fever.”

That illness has devastated hog farms in China, the world’s largest consumer of pork, and has spread to Vietnam and the Koreas. Its effects are rippling through pork prices around the world.

Even before the 2018 ground turkey recalls, Jennie-O endured several years of challenging market conditions created by the avian flu outbreak of 2015. That health scare led many growers to overcompensate for their flock losses, creating a market oversupply that depressed prices.

Now, those fundamentals are starting to stabilize. When coupled with distribution gains, Hormel expects the upward trend to continue in 2020. “We are working on the next few wins (in Jennie-O) and we have to bring those across the finish line, but we are really seeing the right signs,” Snee said.

Executives attributed this quarter’s improvement in that business to better whole-bird and commodity sales that more than offset still-lower retail sales. They also increased advertising and promotions on Jennie-O’s lean ground turkey helped bolster results this fall.