Hormel Foods Corporation (NYSE: HRL) Q2 2025 Earnings Call | 5/29/2025

Thank you, Chess. And good morning, everyone. We achieved solid organic topline growth and delivered second quarter results in line with our expectations. We are committed to delivering profitable and predictable growth and despite a dynamic operating environment, we stayed focused on our long-term strategy, executed with discipline, and delivered results consistent with our expectations. In retail, we continue to hold leadership positions in the marketplace across our diverse portfolio. Our success with both consumers and customers is rooted in providing a stable, reliable brand and products they can trust. While continuously evolving to meet the expectations of today's market, we continue to find ways to drive value for our consumers beyond price through quality, product differentiation, innovation, and convenience. This quarter, I want to highlight three areas of the retail portfolio that really brought this to life. The Applegate brand is well aligned with today's consumer demand for convenient protein solutions. The brand experienced incredible sales growth, outpacing the total edible category while also growing households. The launch of the convenience breakfast platform has been well-received in the marketplace. Building on that momentum, the brand recently introduced a new line of lightly breaded chicken products, further expanding its reach and relevance. This ongoing pipeline of innovation combined with a compelling value proposition reinforces our confidence in the sustained strength and growth potential of the Applegate brand. At the same time, Jennie-O lean ground turkey continues to be a high-performing and strategically important offering within our portfolio, positioned to meet today's consumer preferences. As demand for lean, high protein food grows, Jennie-O is a go-to choice for consumers, demonstrated by consistent consumption gains and strong category leadership. Through the strategic transformation of the Jennie-O business over the last few years, we are further aligned as a demand-driven portfolio. We continue to have the right strategy and structure for steady long-term growth. Finally, our Mexican Foods portfolio delivered on the growing demand of high-quality and flavorful meal solutions at home. In the second quarter, we saw continued success with our legacy Herdez salsa business, while our refrigerated guacamole portfolio experienced double-digit consumption growth driven by Herdez and Holy brands. To provide another authentic convenient meal solution, the team expanded our refrigerated entrée line to now include El Pastor. Led by our flagship and rising brands, our broader retail portfolio is well positioned to deliver the quality, differentiation, innovation, and convenience that consumers demand in today's market.

Turning now to food service. Our food service business remained resilient in the quarter despite industry softness. Many of our branded products such as Jennie-O, Hormel Fire-Brazed Meats, and Café H globally inspired proteins delivered strong volume and net sales growth in the quarter. Our direct selling organization, solution-based approach, and a diverse channel presence has once again outperformed the broader food service industry. In addition to our already diversified portfolio that provides high-quality and convenient solutions, the team is motivated to deliver on flavor trends and help our operators serve their customers faster. As an example, at the International Pizza Expo in March, the team showcased our latest pizza topping creation. Recognizing that hot honey has become the fastest growing pizza ingredient, our team saw the perfect opportunity to capture that cravable sweet heat in the form of our premium quality sausage, ultimately creating Fontanini hot honey sliced sausage. Additionally, our Flash 180 Sous Vide chicken is designed to streamline back of the house operations. It delivers a consistent, high quality product while significantly reducing prep time and labor, allowing more operators to serve the most in-demand menu item, the chicken sandwich. It's this kind of multi-faceted, forward-thinking that keeps Hormel Food Service a leader in the marketplace. Rounding out our segments, our international business delivers strong topline growth in the quarter driven by an impressive double-digit volume and net sales growth in exports and robust growth in China. Our in-country China business continued to perform well led by customer and distribution expansions and continues to lead the company in innovative product offerings. The recent launch of Hormel Barbecue Bites is just one example of the team's deep understanding of consumer trends and their ability to create meaningful innovations that address in-country market demands. These six examples demonstrate the continuous transformation of our portfolio with innovative high-quality products that meet the evolving needs of our consumers.

Now this year is a story of momentum and as we've discussed, we expect half one and half two results will look very different. What will not be different, however, is our strategy. As we have intentionally structured our business to balance changes in the marketplace, our confidence in our brands and our team, our responsibility to our consumers, customers, and operators, and our commitment to long-term results for our shareholders remain. We anticipate strong second half growth led by our range of consumer-focused, protein-centric products. Notably, we expect meaningful contributions from our turkey portfolio, continued momentum in the Planters brand, growth from our leading positions in the marketplace, and ongoing benefits from our Transform and Modernize initiative. Jent will walk through turkey and our continued progress against our Transform and Modernize initiative in more detail, but I want to take a moment to dive further into a Planters and SPAM update. Our Planters snack nuts performance exceeded our second quarter expectations and these results have paved the way for what's to come in the second half. We expect to see sequential quarter-over-quarter sales improvement and year-over-year growth. This is a legacy powerhouse brand with a loyal consumer base and a portfolio of product offerings that ranges from classic comforts to bold flavors and textures. By investing in the brand and putting our proven strategy into action, we expect the Planters brand to be a driving force in the second half. Turning now to the SPAM brand. After an impressive first half, we expect an equally impressive second half. We continue to evolve this iconic brand while staying true to its core identity as a versatile, convenient protein solution. Its global momentum has been building fueled by the strategic efforts to expand beyond the center store and deeper engagement with cultural trends. The rising popularity of SPAM Musubi and a recent high-profile collaboration featured in a live-action film set in Hawaii has led to significant merchandising activity and reinforced the brand's authentic cultural connection. We believe the SPAM brand is a timeless classic and we are confident in our growth trajectory for the back half of the year supported by strong execution and strategic momentum.

In the face of an evolving backdrop, we are responsibly narrowing our fiscal 2025 outlook which remains largely unchanged for the full year. We now expect increased net sales growth of 2 to 3% which is being supported by our value-added turkey portfolio, the Planters brand, our leading positions in the marketplace, continued growth in food service, and higher commodity markets overall. We now expect adjusted diluted earnings per share in the range of $1.58 to $1.68, which takes into account our current views on the consumer, tariffs, and lower investment income. This range implies impressive growth in the second half of the year, aided by investments across our brands and further benefits from our Transform and Modernize initiative. While the macro environment is ever-changing, our strategy is consistent and clear. Our topline momentum is building. Our diversified portfolio allows us to navigate changing preferences and trends. And we are on track to deliver the benefits of our Transform and Modernize initiative, positioning us to regain our long-term growth trajectory. Our team continues to be, in my opinion, the best in the industry, and each and every one of us is committed to the long-term success of our company.

Now before I transition the call to Jent, I'd like to address some of the leadership changes we announced this past quarter. Our incredibly competent management team and deep bench of talented leaders is a unique advantage for our company and I am pleased to celebrate the advancements we have recently announced. First, Dr. Kevin Meyers was appointed to lead our supply chain efforts. A nearly 25-year employee of Hormel Foods, Kevin has led critical areas including product development, quality control, food safety, and packaging design. Prior to joining the company, he spent a decade in the food industry, holding leadership roles in food technology and R&D. Kevin is widely respected for his expertise and insight, is a trusted adviser, and one of the most capable leaders in the organization. Candidly, he's one of the smartest people I know. With Kevin at the helm, we remain focused on transforming our supply chain, delivering for our customers, and driving operational excellence. Next, we announced that Scott Aal, Group Vice President and Chief Marketing Officer for Retail, will retire at the end of the fiscal year after an astounding 35-year career with Hormel Foods. We are pleased to share that Scott has been appointed to the Hormel Foods board of directors, ensuring we will continue to benefit from his strategic insight and deep brand expertise. Throughout his career, Scott has held several pivotal leadership roles from guiding our grocery products marketing to leading corporate innovation and launching our brand fuel growth engine. On a personal note, I am grateful to have built my career alongside him. Scott's creativity, bold thinking, and thoughtful leadership have left a lasting mark, and his impact will continue to shape our future. Finally, with Scott's impending retirement, we announced that Jeff Baker, a 35-year Hormel veteran, will lead the retail marketing efforts with the start of fiscal 2026. He will oversee the continued evolution of our branded portfolio, driving growth in snacking and entertaining and our food-forward platforms. Jeff's proven track record of growth, sharp strategic insight, and a deep understanding of our brands and consumers has been built through his leadership roles across the company. Beyond his results, Jeff is known for his commitment to our company and his ability to foster an inclusive, high-trust, high-performing culture. I'm fortunate to work alongside a team of such strategic senior leaders and our recent leadership advancements give me great confidence in our company's future. At this time I will pass the call to Jent to discuss the financial details of our second quarter and provide more color on our outlook for the year.

Yeah, great. Thanks Peter, appreciate the question. Let's start with that first part in terms of the back half of the year. And I think what's really important here is this idea that there's a lot to like about how well positioned we are for the back half of this year and our ability to deliver a strong second half. Some of the things that we've been talking about over the last number of quarters and that is that Planters recovery is on track, what's happening with our turkey portfolio especially value-added turkey, we're seeing really positive momentum. And then when we get into the businesses, specifically our value-added business in retail continues to perform well and it might be helpful when I wrap up here to have John give you just a little more color on that. When we get to food service, we've had strong momentum on the top line and we do expect to have some favorable year-over-year comps in the second half. We'll have international with steady, strong growth. And then just in regards to TNM overall, we've said it's on track and so it is delivering what we expect it to deliver in fiscal year 2025. There's a lot going on in the organization. There's a lot of projects that we're working on. But again, the important thing here is when we roll up all of these drivers for our business, it's really what we expected at the beginning of the year for the back half of the year. And so there's this really great substance in our ability and our confidence to be able to deliver this strong, achievable second half number. And John, if you want to maybe add some color on retail.

Yeah, Peter, I'm going to let Jent start off on the cadence and then I can come back to turkey.

From a sales guide perspective, we're expecting low single-digit retail, mid single-digit food service, and high single-digit international business. So all in all, that's what really gets us to that Q3 outlook.

Yeah. And when we think about turkey specifically, I mean, you're right. The competitive landscape, we've seen a tightening supply. And so of course, we're thinking about it from our perspective and thinking about the work that we did several years ago to really make this a demand-driven business. We're really well positioned on the supply chain and we've got and are in a good supply position overall. Now again, I want to emphasize, we are focused on the value-added portion of this business. When we think about lean ground turkey in our retail segment and the great work that team has done to drive that business, the number one brand in a growing category, strong supply behind it, that's really, really important. And I mean, we're overcoming turkey markets that not all of them are in our favor, right? And so this is something that we're navigating, but it's something that we do really well. We understand how to manage through it. You know, there's a backdrop of whole birds and what's happening there. Those are slightly better than our original outlook, though we do expect most of the upside will be captured during the fresh season, which is closer to Thanksgiving. But again, overall, the turkey complex is doing really well and well positioned for the back half of the year.

Yeah, I'll take that one, Michael. I mean, I think it starts with the comments we've made about our food service business is that we historically outperform what is happening in the industry. So, we're not immune to what's happening in the backdrop, but what we are focused on is over-delivering and outperforming. We've had strong momentum on the top line in this business. And so that obviously has been a really positive signal as we head into the back half of the year. We do expect to be aided by the improvement in our Planters and c-store business. We've got an incredible pipeline of innovation that's coming. We had a chance to showcase a lot of that at the recent National Restaurant Show. And then of course, I think I mentioned it earlier that we will have a favorable year-over-year comp in the second half for food service. And so when we put all of those things together, supported by the fundamentals of our business, the direct selling organization, we've talked a lot about our diverse channel presence and really underpinning all of it is this solution-based portfolio. That's what sets us up for success and ability to deliver those results in the second half of the year.

Yeah. And Tom, I think that last part is important because our pounds are down, our commodity prices are up. So when you see the dollars, it's one thing, but we are managing this inventory very effectively to align with the needs of the business.

Yeah, Ben, I'm going to start and then I'm going to let John answer most of that question, but I think the important thing here is that this recovery is on track as we've been describing. And when we're looking at the charts and the graphs and everything, all of the trends are headed in the right direction. And that's a really positive signal for us when we think about where the brand is headed and we know as we've said how important this brand is to our portfolio. John, I'll let you get into maybe some of the specific actions.

Yeah, Heather, I'll go ahead and start. What you said is exactly right is that we have seen this tightening supply across the competitive landscape. And so, while the headlines are out there about what's happening, I think the full details about how it's really unfolding is TBD. And I mean, at this point, the biggest facility that's been announced isn't shut down yet. And so again, what's important here is we know the work that we're doing to drive demand, that it's well positioned in the category with the consumer and then as those opportunities present themselves, we can rest assured that we're going to do everything we can to capitalize on them and John and the team obviously are working hard in this space.

Yeah, we're, I mean for us at this point nothing has changed. I mean, we're obviously very excited about the work that's happening. Peter just did a really nice job there elaborating on just how much work is happening across the organization. While we want to get to '26, obviously, our focus right now is on '25 and all of the work that's happening here. And so, nothing has changed in our outlook or from our perspective. Really excited about the benefits that TNM is bringing to the organization not just the financial benefits but the long-term capabilities that we've needed. So all of that is what leaves us in a really, really favorable position for this entire initiative.

Yeah. And Rupesh, I think when we think about retail as John described, we're holding our own in market share, we're continuing to focus on these flagship and rising brands and there's still some clear opportunities on the food service side. We talked about what is happening in terms of the pressure on food away from home and again, we're structured the right way. We have the right strategies to outperform what's happening in that macro environment. And so when we look at whether it's independently or together, we feel like this business, these businesses, our portfolio have us well positioned to navigate those macro factors.

Yeah, Puran, I'll go ahead and take that. I mean, for us, it's this strong momentum on the top line that we'll continue to have. And I think when we're able to capitalize on the opportunities with Planters, when we're able to really start selling against this great pipeline of innovation, that's what gives us the confidence in growth and broad-based growth in food service. And yeah, you're right. We have talked extensively about how we outperform what is happening in the food service marketplace. That's something that we absolutely have to continue to do in order to be able to deliver growth. And so we do expect segment profit growth from food service in the back half of the year and it is Planters, it's innovation but then again as I said we do have some favorable year-over-year comps in the second half.

Yeah. No, it's a good question, Puran. Thanks. And it is fixed. It really is more of a timing issue in terms of shipments and location. But as we think about the back half of the year for international, it's steady, strong growth. Our business in China continues to perform really well and that's obviously a key driver for their ability to deliver what we need them to deliver in the back half of the year but really a timing issue that has been resolved.

Yeah, thank you and thank you all for joining us this morning. We achieved solid topline performance and delivered results in line with our expectations for the second quarter. This accomplishment leaves us incredibly well positioned to deliver a strong second half. And while there's work to do, we have the right structure, the right strategies, and the right portfolio that allows us to be confident in our ability to get this done. Thank you for joining us today, and I hope you have a great rest of your day.