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    HRL
    Earnings call· Jan 2026(Q1 FY26)

    HORMEL FOODS CORP /DE/ Q1 FY26 earnings call HRL

    Feb 26, 2026 Source

    Executive summary

    Hormel Foods Q1 FY26 — Solid Start with Organic Sales Growth and Strategic Portfolio Focus

    Hormel Foods reported a solid Q1 FY26, driven by consistent organic net sales growth and strong performance in Foodservice and International segments. The company is strategically focusing on its value-added protein portfolio, exemplified by the planned divestiture of its whole-bird turkey business, while navigating commodity cost pressures and logistics headwinds. Management reaffirmed full-year guidance, anticipating sequential profit improvement.

    Highlights

    5

    • Delivered 2% organic net sales growth, marking the fifth consecutive quarter of growth.

    • Achieved adjusted diluted EPS of $0.34, exceeding prior expectations.

    • Foodservice segment organic net sales grew 7%, marking its 10th consecutive quarter of growth.

    • International segment delivered high single-digit organic net sales growth and strong segment profit growth.

    • Cash flow from operations increased by $26 million to $349 million.

    Concerns

    4

    • Retail segment organic volume and net sales declined due to strategic exit from non-core private label snack nut items and soft consumption in some areas.

    • Gross profit was hampered by higher input costs (beef, pork trim, nuts) and unexpected increases in logistics expenses in Q1.

    • Adjusted diluted EPS of $0.34 was $0.01 below last year's Q1.

    • Commodity input costs, particularly beef, are expected to remain a headwind throughout FY26.

    Guidance & targets

    8
    CategoryTargetConfidence
    Adjusted diluted EPS
    flat to slightly up compared to last year
    high materiality
    High
    Organic net sales growth
    1% to 4%
    high materiality
    High
    Adjusted operating income growth
    4% to 10%
    high materiality
    High
    Adjusted diluted earnings per share
    $1.43 to $1.51 per share
    high materiality
    High
    Capital expenditures
    $260 million to $290 million
    medium materiality
    High
    Net sales reduction from whole-bird turkey divestiture
    approximately $50 million
    medium materiality
    High
    Annualized net sales of whole-bird turkey business
    $200 million and $275 million
    medium materiality
    High
    Effective tax rate
    22.4%
    low materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Retail
    Organic volume and net sales declined due to strategic exit from non-core private label snack nut items. Profitability was pressured by higher raw material costs and unexpected logistics expenses. Second wave of pricing effective Q2.
    Organic volume: declinedOrganic net sales: declinedTotal Hormel dollar sales (Circana 13-week): up over 2%Priority brands dollar sales consumption: up 3%
    		—down 2%—below prior year
    Foodservice
    Strong performance driven by premium prepared proteins and branded pepperoni. Pricing aligned with market movements, contributing to impressive segment profit growth.
    Organic net sales growth: 7%Organic net sales growth streak: 10 consecutive quartersVolume: flat
    		—7%—equally impressive
    International
    Net sales growth driven by multinational businesses and branded exports, led by SPAM luncheon meat. Balanced model contributed to strong segment profit growth.
    Organic net sales growth: high single-digit
    		—high single-digit—strong segment profit growth

    Operational metrics

    21
    Organic net sales growth
    2%
    Q1 FY26

    Fifth consecutive quarter of organic net sales growth.

    Adjusted diluted EPS
    $0.34$0.01 below last year
    Q1 FY26

    Adjusted diluted earnings per share for the first quarter.

    Capital expenditures
    $69 million
    Q1 FY26

    Q1 capital expenditures.

    Dividends paid
    $160 million
    Q1 FY26

    Returned approximately $160 million to stockholders during the quarter through dividends.

    Gross profit
    —
    Q1 FY26

    Continued to be hampered in the first quarter with top line growth more than offset by higher input costs and higher-than-expected logistics expenses.

    Adjusted SG&A
    comparable to prior year
    Q1 FY26

    Adjusted SG&A and adjusted SG&A as a percent of net sales were comparable to the prior year.

    Marketing and advertising spend
    increase for the full yearcompared to last year
    FY26

    We continue to expect an increase in marketing and advertising spend for the full year compared to last year.

    Adjusted operating income
    $247 million
    Q1 FY26

    Adjusted operating income for the first quarter.

    Adjusted operating margin
    8.2%
    Q1 FY26

    Adjusted operating margin for the first quarter.

    Effective tax rate
    22.4%
    Q1 FY26

    Effective tax rate for the first quarter of 2026.

    Pork input costs
    declinecompared to FY25
    back half of FY26

    Expected to decline compared to fiscal 2025, but still remain above the 5-year average.

    Beef costs
    high
    FY26

    Beef costs remain high and are expected to be a headwind throughout fiscal 2026.

    Nut costs
    elevatedfrom the prior year
    FY26

    Nut costs are anticipated to be elevated from the prior year.

    Logistics expenses
    elevatedunexpected increases
    Q1 FY26

    Unexpected increases in logistics expenses in the latter half of the first quarter, creating modest upward pressure on transportation costs.

    Hormel production system
    progressed beyond foundational phase
    Q1 FY26

    Facilities that have fully implemented the model are now driving continuous improvement.

    Order-to-cash modernization
    completed another phase
    Q1 FY26

    The team made great progress in the first quarter, completing another phase of our order-to-cash modernization.

    Jennie-O ground turkey dollar sales consumption
    up double digits
    Q1 FY26

    Jennie-O ground turkey dollar sales consumption was up double digits in the first quarter, specifically over 15%.

    Planters snack nuts dollar sales consumption
    growth
    Q1 FY26

    The Planters brand delivered both consumption and net sales growth in the first quarter.

    Hormel Gatherings volume and dollar consumption
    double-digit
    latest 4-week period

    Hormel Gatherings, for example, delivered double-digit volume and dollar consumption growth in the latest 4-week period.

    Flash 180 tenders adoption rates
    consistent with successful historical foodservice launches
    Q1 FY26

    Flash 180 tenders launched late last fiscal year and in the first quarter are already demonstrating adoption rates consistent with some of our successful historical foodservice launches.

    Hormel Black Label oven-ready bacon sales from e-commerce
    60%
    current

    60% of its sales are being generated through e-commerce.

    Industry KPIs

    6
    MetricValueDetails
    Gross margin—
    Brand platform growthup 3%%
    Organic net revenue growth2%%
    Adjusted EPS operating income$0.34USD
    Retailer trade negotiation statuswell accepted
    Elasticity consumer response commentaryin line with expectations

    Product announcements

    3
    ProductTypeDetails
    SPAM chickenlaunch
    Flash 180 tenderslaunch
    Hormel Black Label oven-ready baconlaunch

    Deals & partnerships

    2
    Life-Science Innovations (LSI)Sale of whole-bird turkey business, including Melrose, MN production facility, Swanville, MN feed mill, and associated transportation assets. LSI will assume supply contracts with dedicated third-party hen growers.

    Supports goal of reducing exposure to volatile, commodity-driven businesses and sharpening focus on value-added protein portfolio. Hormel will retain value-added turkey products, Jennie-O brand name, and rights to sell Jennie-O Oven Ready whole birds and turkey breast. Hormel will continue to own and operate all other turkey plants, feed mills, transportation assets, and turkey barns associated with raising and processing tom turkeys for value-added products. LSI will provide co-manufacturing services through end of FY26 for transition.

    unnamedNew strategic partnership for the Justin's branded business.

    Better aligns the business with an ownership model that can appropriately support and resource the Justin's growth plan.

    Risks & headwinds

    4
    Higher input costsQ1 FY26, beef expected throughout FY26

    pork trim increased 12% compared to last year

    Mitigation: Pricing actions (second wave of Retail pricing effective Q2), productivity gains from Transform and Modernize initiative.

    Unexpected increases in logistics expenseslatter half of Q1 FY26, continued in early Q2

    modest upward pressure on transportation costs

    Mitigation: Monitoring conditions to assess persistence; second wave of retail pricing aimed at offsetting cost pressures.

    Challenging consumer environmentQ1 FY26, ongoing

    industry-wide limited retail consumption growth

    Mitigation: Creating and marketing compelling branded offerings, solutions-based portfolio for operators, strategic investments in capabilities.

    Decline in Retail segment organic volume and net salesQ1 FY26

    down 2% net sales

    Mitigation: Strategic exit from non-core private label snack nut items, second wave of retail pricing, Transform and Modernize initiative, mix improvement, investments in capabilities.

    What to watch in Q2 FY26

    5

    Adjusted EPS

    Q2 FY26
    Current$0.34 (Q1 FY26)
    Targetflat to slightly up compared to last year

    Why it matters

    Verifying the start of sequential profit improvement, which is key to achieving full-year guidance and demonstrating the effectiveness of pricing and restructuring actions.

    For Q2, we expect to deliver another quarter of top line growth and adjusted diluted EPS that is in the range of flat to slightly up compared to last year.

    Q&A highlights

    6

    Seeking more detail on Q2 EPS expectations, segment-level contributions, and the nature/duration of logistics cost increases.

    Management reiterated expectations for sequential profit improvement in Q2, with adjusted EPS flat to slightly up year-over-year, benefiting from retail pricing and SG&A actions. They acknowledged the challenging freight environment, noting it's too early to determine if it's seasonal or longer-term.

    “Heading into Q2, our expectation is continued sequential improvement. We should reap the benefits of the completion of the second wave of retail pricing, which was aimed at offsetting some of the cost pressures we've talked about for the last several quarters. And on top of that, we will now start having full quarters of benefit from our SG&A actions.”

    asked by Thomas Palmer · answered by Jeffrey Ettinger

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Portfolio Focus and Divestiture

    Hormel Foods is sharpening its focus on value-added protein solutions. The definitive agreement to sell its whole-bird turkey business to Life-Science Innovations (LSI) supports this goal by reducing exposure to volatile, commodity-driven businesses. The sale includes the Melrose, MN facility, Swanville feed mill, and associated transportation assets, but excludes value-added Jennie-O turkey products and the Jennie-O brand name. This move is expected to drive substantial margin expansion in the retained value-added turkey business.

    02

    Retail Segment Challenges and Revitalization

    The Retail segment experienced a decline in organic volume and net sales, primarily due to the strategic exit from non-core private label snack nut items. Profitability was further pressured by higher raw material costs and unexpected logistics expenses. Management is implementing strategic actions, including a second wave of retail pricing (effective Q2 FY26) and investments in capabilities, to strengthen top-line performance and profitability. Despite challenges, priority brands like Jennie-O ground turkey and Planters snack nuts showed consumption growth.

    03

    Foodservice and International Segment Strength

    Both the Foodservice and International segments delivered strong performance. Foodservice achieved its 10th consecutive quarter of organic net sales growth (7%), driven by premium prepared proteins and branded pepperoni, with pricing aligning with market movements. The International segment also saw high single-digit net sales growth, led by multinational businesses and branded exports like SPAM luncheon meat, contributing to strong segment profit growth.

    04

    Operational Improvements and Cost Management

    The "Transform and Modernize" initiative is progressing, with the Hormel production system driving continuous improvement and efficiency in fully implemented facilities. A restructuring program is also underway, with financial benefits expected to materialize more meaningfully from Q2 FY26, impacting both COGS and SG&A. These savings are partially offsetting strategic investments in technology, people, and brands.

    05

    Leadership and Capability Enhancements

    Hormel is evolving its leadership team to drive growth, bringing in external talent with world-class capabilities in marketing, analytics, technology, and e-commerce, while also promoting internal leaders. Key appointments include a Group Vice President of Enterprise Business Performance, a Group Vice President of Retail Sales, an Enterprise Chief Marketing Officer, and an Executive Vice President of Retail, aimed at strengthening decision-making, execution, and consumer-led growth.

    06

    Commodity and Logistics Headwinds

    The company faced significant commodity input cost headwinds in Q1, particularly for beef, pork trim, and nuts, which pressured gross profit. Unexpected increases in freight and logistics expenses also emerged in the latter half of Q1 due to tightening capacity, severe winter weather, and industry dynamics. While some commodity relief is expected in the back half of FY26, beef costs are anticipated to remain high.

    AI-generated summary of the company’s earnings call. Not investment advice.