By Michael Calia
Hormel Foods Corp.'s (HRL) fiscal third-quarter earnings rose
2.2% as higher raw material costs squeezed margins amid sales
growth for the packaged-foods producer.
Hormel, whose brands include Spam and Dinty Moore, has posted
improving revenue for more than three years as consumers choose to
eat at home more often. Rising commodity costs and customers'
resistance to higher prices, however, have tightened margins.
Hormel bought the Skippy peanut-butter business from Unilever
(UN, ULVR.LN) for about $700 million this year, a move that has
expanded its offerings as well as its presence in China.
For the quarter ended July 28, Hormel reported earnings of
$113.6 million, or 42 cents a share, up from $111.2 million, or 41
cents a share, a year earlier. Sales grew 7.5% to $2.16 billion
while volume was up 3%.
Analysts polled by Thomson Reuters most recently forecast
earnings of 45 cents a share on $2.12 billion in revenue.
Gross margin remained flat at 15.3%, as input costs grew 7.5%,
keeping pace with sales growth. Also selling, general and
administrative costs were up 4.1%.
At the refrigerated-foods business, its largest top-line
contributor, sales rose 2.4%, but operating profit shrank 26% due
to higher costs, particularly with pork products.
Grocery-products sales, which include Skippy, rose about 25% and
profit surged 32%.
Shares of Hormel, which backed its downbeat full-year adjusted
earnings guidance from June, were inactive at $42.11 premarket. The
stock is up 35% this year.
Write to Michael Calia at michael.calia@wsj.com
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