Update on SG&A savings initiatives and future expense levels.

SG&A reductions are on track, with Q2 SG&A up a modest 2% due to these efforts. Savings have freed up capacity for growth and covered headwinds like incentives. Some actions also impacted cost of goods, not just SG&A. “Really, our SG&A reductions that we talked about are on track for the year, our efforts, I should call them, net-net as Paul mentioned, Q2 SG&A was up a modest 2%.”

How are gross margins expected to trend in Q3 and the rest of the year after strong Q2?

Q2 gross margin progression was driven by retail pricing, favorable mix from key brands (Jennie-O, Applegate, Black Label Bacon), and strong manufacturing performance, especially in turkey. Q3 will see some impact from elevated freight/commodity costs and inventory rebalancing, but overall margin progression is positive. “We experienced the benefits of that second wave of retail pricing. So we mentioned that in the call last quarter that wave was announced at the -- towards the very end of fiscal 2025. So really with about a 90-day lag time on that pricing being in effect, it was the second quarter that benefited from it in retail.”

Quantify the positive impact of manufacturing and logistics on Q2 results.

Q2 outperformance stemmed from strong top-line growth across all segments, effective pricing (including the second wave of retail pricing), favorable mix (foodservice, Jennie-O, Applegate, Black Label Bacon), and strong manufacturing performance, particularly in turkey. A discrete gain on the rabbi trust also contributed but was not the main driver. “On top of that, there were 3 other levers that contributed that we've been discussing. Pricing is one. I mean, pricing was really important. We saw the benefits of the pricing flowing through across the businesses that included, as I mentioned, that second wave of retail pricing that we discussed last quarter.”

HRL

Hormel Foods (HRL) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Apr 2026 (Q2 FY26)· Consumer Staples· May 28, 2026

Source: earnings call transcript

Executive summary

Hormel Foods Q2 FY26 – Strong Performance Drives Double-Digit Adjusted Earnings Growth

Hormel Foods delivered a strong second quarter, marked by consistent top-line momentum and significant bottom-line improvement, exceeding original expectations. The company reaffirmed its full-year organic net sales and adjusted EPS guidance, trending towards the upper half of the earnings range despite anticipated Q3 cost pressures from elevated fuel, commodity markets, and inventory rebalancing. This performance reflects the strength of its protein-centric portfolio and disciplined execution.

Highlights

Achieved sixth consecutive quarter of organic net sales growth, up 3%.
Delivered impressive double-digit adjusted earnings growth, with adjusted EPS up 14% to $0.40.
Gross margin expanded to 17.4%, up 70 basis points year-over-year.
Foodservice segment organic net sales grew 7%, marking its 11th consecutive quarter of growth, with segment profit up 11%.
International segment organic net sales grew 5% with segment profit up 20%.

Concerns

Anticipates Q3 adjusted earnings to be more in line with prior year due to near-term cost pressures.
Higher logistics expenses and increased fuel prices continued to be a year-over-year headwind.
Pork and beef markets remained elevated relative to historical levels, with potential volatility in the second half.
Targeted actions to rebalance certain ambient inventory levels are expected to cause near-term cost pressure in Q3 due to lower plant utilization.
Effective tax rate is trending towards the higher end of the guidance range.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year net sales	$12.2 billion to $12.5 billion high materiality	FY26 · 2026	High
Full-year adjusted earnings per share	$1.43 to $1.51 high materiality	FY26 · 2026	High
Full-year adjusted earnings per share trend	trending towards the upper half of our earnings range high materiality	FY26 · 2026	Medium
Q3 adjusted earnings	more in line with the prior year medium materiality	Q3 · 2026	High
Retail organic net sales growth	flat to low single-digit growth medium materiality	FY26 · 2026	High
Foodservice organic net sales growth	mid-single-digit growth medium materiality	FY26 · 2026	High
International organic net sales growth	high single-digit growth medium materiality	FY26 · 2026	High
Whole-bird turkey business divestiture impact on FY26 net sales	$50 million reduction medium materiality	FY26 · 2026	High
Whole-bird turkey business divestiture impact on FY26 adjusted earnings	minimal impact low materiality	FY26 · 2026	High
Effective tax rate	trending towards the higher end of our range low materiality	FY26 · 2026	High
Q4 bottom line	double-digit increase medium materiality	Q4 · 2026	High
Pork bellies market outlook	relatively flat year-on-year with fiscal '25 medium materiality	H2 FY26 · 2026	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Foodservice Outstanding quarter with broad-based strength across the portfolio, including Hormel Natural Choice, Austin Blues, Jennie-O, and Fontanini. Profitability improved due to market-based pricing and cost benefits in the supply chain, leading to gross margin expansion. Leadership in pizza toppings (pepperoni) with new Calabrian chili pizza toppings launched. Organic net sales growth: 7%Segment profit increase: 11%Consecutive quarters of organic net sales growth: 11th	—	7%	—	11% increase
International Very good quarter with momentum across key markets and brands. China remained a driver, supported by strong demand and a localized strategy. The branded export business, led by the SPAM brand, also performed well. Organic net sales growth: 5%Segment profit growth: 20%	—	5%	—	20% growth
Retail Performed ahead of expectations. Strong performance in value-added poultry (Jennie-O, Applegate) and the Herdez brand. The second wave of pricing actions was fully reflected on shelf, with elasticities tracking largely in line with expectations. Opportunities remain in some areas like Planters and SKIPPY. Organic net sales growth: 1%Segment profit growth: 13%Jennie-O ground turkey dollar sales growth: double-digitJennie-O ground turkey dollar share growth: based on latest 13-week Circana data ending April 19Total retail dollar consumption growth: over 1%Priority brands dollar consumption growth: 3%	—	1%	—	13% growth

Product announcements

Product	Type	Timeline	Details
Calabrian chili pizza toppings	launch	this year's International Pizza Expo

Deals & partnerships

Whole-bird turkey business buyer divestiture

Divestiture of the whole-bird turkey business, reinforcing focus on higher value, less volatile branded offerings. Recorded a loss on the transaction reflected in SG&A.

Risks & headwinds

Near-term cost pressures Q3 FY26

Q3 adjusted earnings more in line with prior year

Mitigation:Fully reflected in full year outlook; underlying business strength remains.

Higher logistics expenses Q2 FY26 and Q3 FY26

year-over-year headwind

Mitigation:Improved execution in Q2 to better navigate environment and manage costs; plans in place to continue mitigating headwinds.

Increased fuel prices Q2 FY26 and Q3 FY26 (full quarter impact)

added incremental pressure

Mitigation:Partially offset by execution improvements; embedded in guidance.

Pork and beef market volatility Second half FY26

remained elevated relative to historical levels

Mitigation:Guidance range appropriately reflects potential volatility; outlook assumes pork prices closer to last year's levels in H2.

Inventory rebalancing costs Primarily Q3 FY26

near-term cost pressure due to lower plant utilization

Mitigation:Targeted actions for certain ambient inventory levels to support a more efficient operating model going forward.

Effective tax rate trending higher FY26

trending towards the higher end of our range

Mitigation:Embedded in full year guidance.

Structural pressure in certain retail businesses (Planters) Ongoing

not performing as well

Mitigation:Enhancing promotions, developing new pack size strategies, increasing digital investment and e-commerce efforts.

Softer consumption in SKIPPY H1 FY26

softer first half of the year

Mitigation:Decision to pull first half promotions after Little Rock fire; now fully back in business with significant improvement in recent consumption data.

Q&A highlights

Why reaffirm guidance despite back-half concerns, and what's the Q3 cadence?

Management is confident in the reaffirmed guidance, trending towards the upper half of the EPS range, due to strong business momentum. Q3 will be flat year-over-year due to higher fuel costs, elevated commodity markets, and inventory rebalancing, but Q4 is expected to rebound.

“We do believe we are trending to the upper half of the range at this point. Our ability to connect with consumers and operators, coupled with solid management of our business does indeed make us even more confident that we can deliver on our year plan and our algorithm growth.”

asked by Leah Jordan · answered by Jeffrey Ettinger

2 min read 6 chapters

Detailed narrative

Strategic Portfolio Positioning

Hormel's protein-centric portfolio and balanced retail/foodservice presence enabled consistent top-line growth despite a dynamic external environment. The company's focus on value-added offerings and strategic pricing actions contributed to strong performance across segments. This positioning helps meet diverse consumer and operator needs, translating into marketplace success.

Operational Excellence and Supply Chain

Meaningful improvements in manufacturing performance, particularly in vertically integrated turkey operations, and better navigation of logistics challenges, despite higher fuel costs, were key drivers of margin expansion and segment profit growth. The company also appointed Don Monk as its first Chief Technology Officer to strengthen digital capabilities, aiming for greater speed, agility, and impact across the business.

Retail Segment Focus Areas

While overall retail organic net sales grew 1% with 13% segment profit growth, the company is addressing structural pressures in certain brands. Planters underperformed due to consumer trade-down from more expensive nuts like cashews, prompting enhanced promotions and digital investment. SKIPPY's softer first half, caused by a prior fire and promotional timing, is now showing significant consumption improvement in Q3.

International Growth and Localization

The International segment saw strong organic net sales growth of 5% and 20% segment profit growth, driven by momentum in key markets like China and the continued success of the SPAM brand in branded exports. A localized strategy and disciplined resource investment are key to continued opportunities and growth in these markets.

Capital Allocation and Financial Strength

The company generated $179 million in operating cash flow and returned $161 million to stockholders through dividends, maintaining a strong financial position with $827 million cash on hand, up $156 million since the end of FY25. The divestiture of the whole-bird turkey business reinforces focus on higher-value, less volatile branded offerings, with a minimal impact on full-year adjusted earnings.

Integrated Business Planning and Inventory Management

Proactive steps are being taken to rebalance certain ambient inventory levels, primarily in Q3, which will lead to temporary lower plant utilization but supports a more efficient operating model going forward. This adjustment is a clear example of how enhanced integrated business planning is driving more forward-looking decisions and improving operational efficiency.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.