Hormel Foods (HRL)
Q1 2011 Earnings Call
February 22, 2011 1:45 pm ET
Jody Feragen - Chief Financial Officer, Executive Vice President and Director
Company Speaker -
Jeffrey Ettinger - Chairman, Chief Executive Officer and President
Diane Geissler - Credit Agricole Securities (USA) Inc.
Jonathan Feeney - Janney Montgomery Scott LLC
Ann Gurkin - Davenport & Company, LLC
Robert Moskow - Crédit Suisse AG
Farha Aslam - Stephens Inc.
Kenneth Zaslow - BMO Capital Markets U.S.
Timothy Ramey - D.A. Davidson & Co.
Akshay Jagdale - KeyBanc Capital Markets Inc.
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Well, good afternoon, everybody. If everybody could find their seats as quickly as possible, I'd like to get the next presentation started. And to that end, we're delighted to have with us Jeff Ettinger, the Chairman, CEO and President of Hormel Foods; as well as Jody Feragen, Executive Vice President, Chief Financial Officer; and Kevin Jones, Director of Investor Relations.
It's fair to say since taking over the helm, Jeff has transformed Hormel from the protein company that everyone would like to be, which is how I thought it was always described, to a food company, with results that most competitors would like to have over the last two or three years. With strong performance in both Refrigerated Foods and Jennie-O Turkey Store especially, it left them with a solid base for growth in the future, something we're looking forward to hearing about today.
Jeff, take it away.
Thank you very much, John [ph]. We certainly are going to provide some forward looking statements this afternoon, but before we do that, we want to start with the here and now. This morning was earnings announcement morning for our first quarter of 2011. And we're very pleased that our team was able to deliver an outstanding quarter.
We saw sales increase of 11%, with all five operating segments that register year-over-year gains for the quarter. As you can see from the tonnage comparison, we had a certain amount of volume increase. The remainder of the increase in net sales would be attributable to pricing and to enhanced mix of the products.
On an earnings per share basis at $0.55 per share, we registered a 34% increase for the quarter, again very strong results. And all of these numbers are post lift [ph] (12:18). Our shareholders approved the split of our stock back on January 31 and it was enacted in the market on Valentine's Day.
Jody is going to speak to these results. We're going to kind of have this be a combined forward-looking and strategic session and also give you a little bit of deeper color about our quarter. Before I turn it over to Jody, I do want to mention our new guidance that was included in the release this morning. We have started the year at a guidance range of $1.55 to $1.60 per share. Our new guidance range effective today is $1.62 to $1.68. In generating this range we're kind of balancing the fact that we definitely see significant momentum in our business. Not only did we have such outstanding sales results this quarter, but clearly, in 2010, we had very strong sales results throughout our portfolio. But we're also very mindful of the inflation headwinds that every speaker today has talked to and it certainly will affect our business as well.
With that, I'm going to turn the program over for a time here to Jody Feragen, our Chief Financial Officer.
Thank you, Jeff. It's certainly nice to be in Florida when you come from cold and snowy Minnesota. But it's also nice to be here on a day that we announce record earnings and record sales for our first quarter. And those sales were really driven by the results at our Jennie-O Turkey Store. They were really exceptional results, segment profit up 122% versus last year. Those profits were positively impacted by higher commodity meat prices, continued operational and efficiency gains in their supply chain, increased value-added sales and favorable hedge position.
Sales for the quarter were up 14%, driven by increased volume and the higher prices we talked about on commodity meat. But also our year-end ad campaign helped drive our value-added sales up high single digits and we saw double-digit growth in our Jennie-O Turkey Store turkey burgers and fresh tray pack items.
Refrigerated Foods continued to benefit from the higher pork operating profit. Those profits helped offset lower margins in some of our value-added businesses, such as our Meat Products and Foodservice groups that continued to fight against higher pork prices. Refrigerated Foods sales grew 13%. Our Meat Products group saw nice growth with Hormel Party Trays, Hormel pepperoni, Hormel Refrigerated Entrées and our newer Hormel Country Crock Side Dish items.
Within Value-added Fresh Meat, our Hormel Always Tender flavored meats showed nice growth for the first quarter as well. Our Foodservice group also saw sales increase, particularly in their Natural Choice and their Barbecue lines. Our Foodservice group continues to see the impact of a weak economy, particularly as it impacts restaurant traffic.
Our Grocery Products segment was negatively impacted with both higher input costs, as well as difficult comparisons with a very strong quarter last year. Sales did grow 6%, fueled by growth in our MegaMex products, as well as increased sales of some of our more legacy items, including the SPAM family of products, Hormel Mary Kitchen hash and Hormel Chili.
Specialty Foods was similarly impacted this quarter. They had higher commodity costs and they experienced a 12% decline in their segment profit. Sales grew modestly as sales of sugar and blended items were able to offset lower contract packaging sales.