• Fourth Quarter Volume: 1.1 billion pounds.
• Fourth Quarter Net Sales: $3.1 billion.
• Full Year Volume: 4.3 billion pounds.
• Full Year Net Sales: $11.9 billion.
• Fourth Quarter Gross Margin: Increased 50 basis points to 16.6%.
• Full Year Gross Margin: Increased 50 basis points to 17%.
• Operating Income for Fiscal 2024: $1.1 billion.
• Operating Margin: 9%.
• Adjusted Operating Margin: 9.6%.
• Full Year Diluted Net Earnings Per Share: $1.47.
• Adjusted Diluted Net Earnings Per Share: $1.58.
• Record Operating Cash Flow: $1.3 billion.
• Dividends Returned to Shareholders: $615 million.
• Capital Projects Investment: $256 million in fiscal 2024.
• Debt: $2.9 billion.
• Cash and Short-term Securities: Over $765 million.
• Inventory: $1.6 billion, a decrease of $104 million from the beginning of the year.
• Net Sales Guidance for Fiscal 2025: $11.9 billion to $12.2 billion.
• Adjusted Diluted EPS Guidance for Fiscal 2025: $1.58 to $1.72.
• Transform and Modernize Initiative Benefits: $75 million in fiscal 2024, with an expected $100 million to $150 million in fiscal 2025.

• Warning! GuruFocus has detected 6 Warning Signs with HRL.

Release Date: December 04, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Hormel Foods Corp (NYSE:HRL) delivered solid results in fiscal 2024, meeting adjusted diluted net earnings per share expectations.
• The company achieved a record year of operating cash flow, delivering $1.3 billion, and returned a record amount of cash to shareholders through dividends.
• Significant progress was made in the first year of the transform and modernize initiative, delivering $75 million in operating income benefits.
• Strong growth was observed in flagship and rising brands such as Hormel Black Label, Jennie-O, SPAM, and Applegate.
• The international segment saw a strong recovery, with increased branded exports and growth from investments in the Philippines and Indonesia.

Negative Points

• Hormel Foods Corp (NYSE:HRL) experienced a $9 million negative impact in Q4 due to storm damage at the Patelin Nebraska facility.
• The company anticipates some near-term commercial impacts and higher costs in Q1 of fiscal 2025, particularly affecting the Planters brand.
• Full year expenses increased compared to last year, primarily due to employee-related expenses and the transform and modernize initiative.
• The company expects SG&A expenses to increase in fiscal 2025, with planned double-digit percentage increases in advertising investments.
• Turkey markets are expected to remain depressed for the full year of 2025, with lower year-over-year whole-bird prices impacting earnings.

Q & A Highlights

Q: Can you provide more details on the FY25 guidance range and the factors that could lead to hitting the low or high end of the range? Also, do you expect earnings growth in Q1? A: James Snee, CEO: The FY25 outlook shows growth on both top and bottom lines, driven by key retail categories like bacon and Applegate, and a strong innovation pipeline. We expect growth in food service and international segments, with additional brand support planned. Q1 will face near-term impacts, but overall, we have confidence in our ability to grow in 2025. Jacinth Smiley, CFO: Higher volume, better product mix, improved turkey market, and overdelivery on our T&M initiative could push us to the higher end of the range.

Q: Your underlying EBIT growth excluding T&M is expected to decline. Is there an element of conservatism in your guidance? A: James Snee, CEO: The T&M initiative is interconnected with the business, creating a growth flywheel. We aim to be appropriate in our guidance, especially given recent volatility in turkey markets and the planters rebound. Our plan is realistic and achievable, supported by strong brand performance and transformation initiatives.

Q: Can you clarify the expected operating profit growth for FY25 and the factors limiting its flow-through? A: Jacinth Smiley, CFO: The T&M initiative is about reinvesting for growth, not just cost savings. The midpoint of our guidance includes considerations for turkey pricing, double-digit brand investments, and capability enhancements. We expect turkey prices to remain low, and we're investing in data, technology, and people.

Q: How are you addressing the cyclical nature of the turkey business, and are there plans to focus more on value-added products? A: James Snee, CEO: We've been working to create a demand-driven turkey business, focusing on value-added products like lean ground turkey, which aligns with consumer trends. The integration into food service has been positive, and we're minimizing volatility by focusing on value-added offerings.

Q: Can you explain the progress and expectations for the Transform and Modernize (T&M) initiative? A: James Snee, CEO: We're on track with the T&M initiative, which is creating a growth flywheel. We've made significant progress in FY24, and we expect acceleration in FY25 and beyond. Nathan Annis, VP of Corporate Development: We've established new procurement systems, improved manufacturing efficiency, and optimized logistics, setting us up for continued success.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.