Hormel Foods NYSE: HRL said its fiscal second-quarter results exceeded internal expectations, driven by organic sales growth across all three operating segments, improved margins and stronger manufacturing performance, particularly in turkey operations.
Interim Chief Executive Officer Jeff Ettinger said the quarter marked the company’s sixth consecutive period of organic net sales growth and included “impressive double-digit adjusted earnings growth.” He said the company’s results reflected pricing actions, mix improvements, productivity gains and benefits from restructuring efforts.
“We delivered an excellent second quarter, highlighted by continued top-line momentum and meaningful improvement in bottom-line performance,” Ettinger said on the call.
Hormel reaffirmed its full-year fiscal 2026 outlook for net sales of $12.2 billion to $12.5 billion and adjusted earnings per share of $1.43 to $1.51. The company said it is trending toward the upper half of the earnings range, though it expects third-quarter adjusted earnings to be more in line with the prior year due to cost pressures and inventory actions.
Sales Growth Extends Across Segments
Interim Chief Financial Officer and Controller Paul Kuehneman said organic net sales rose 3% from the prior year in the second quarter. Gross profit increased 7%, while gross margin expanded 70 basis points to 17.4%. Adjusted earnings per share were $0.40, up 14% from the prior year.
Kuehneman said the company more than offset higher pork and beef costs, logistics expenses and other pressures through top-line growth, market-based pricing, favorable mix and productivity improvements. Equity in earnings increased 12%, mainly due to growth from Hormel’s MegaMex joint venture.
Hormel generated $179 million in operating cash flow during the quarter and spent $82 million on capital expenditures, including investments in data, technology and infrastructure. The company returned $161 million to shareholders through dividends and ended the quarter with $827 million in cash on hand.
Kuehneman also noted the company completed the divestiture of its whole-bird turkey business during the quarter. The transaction resulted in a loss recorded in SG&A, which affected GAAP results. Hormel said it still expects the divestiture to reduce fiscal 2026 net sales by about $50 million, with minimal impact to full-year adjusted earnings.
Foodservice Remains a Standout
President John Ghingo said the Foodservice segment delivered another strong quarter, with organic net sales growth of 7%, marking its 11th consecutive quarter of organic growth. Segment profit rose 11%.
Ghingo cited broad-based strength across brands including HORMEL NATURAL CHOICE, AUSTIN BLUES, JENNIE-O and FONTANINI. He said market-based pricing and supply chain cost benefits helped drive profitability improvement.
“In an environment where traffic remains pressured, we’ve been able to consistently deliver growth,” Ghingo said.
He said Hormel’s direct sales force and solutions-based portfolio helped the company work with operators on value and premium offerings. Ghingo pointed to pepperoni and pizza toppings as growth drivers, including the launch of Calabrian chili pizza toppings at the International Pizza Expo.
International Gains Led by China and SPAM Exports
Hormel’s international segment posted 5% organic net sales growth and a 20% increase in segment profit, according to Ghingo. He said China remained a key driver, supported by strong demand and the company’s localized strategy.
The company’s branded export business also performed well, led by the SPAM brand. Ghingo said the results reflected “focused execution, disciplined investment of resources, and a clear strategy to grow in the right markets with the right brands and products.”
Retail Improves, Though Some Brands Face Pressure
Hormel’s retail segment performed ahead of company expectations, with 1% organic net sales growth, margin expansion and 13% segment profit growth. Ghingo said value-added poultry remained a key growth platform, with JENNIE-O ground turkey posting another quarter of double-digit dollar sales growth and share gains, based on Circana data for the 13 weeks ended April 19.
Applegate also delivered a strong quarter, driven by frozen breaded chicken and chicken breakfast sausage. Ghingo said the HERDEZ brand benefited from expanded distribution and innovation, with the salsa portfolio showing encouraging dollar and volume consumption growth.
The company said its second wave of pricing actions was fully reflected on shelves during the quarter, and elasticities were largely in line with expectations. Still, management identified areas needing improvement. Ghingo said some issues were timing-related, including promotional comparisons, while others reflected more structural pressure.
During the question-and-answer session, Ghingo said PLANTERS did not fully meet expectations in the quarter. He said peanuts performed well, but more expensive nut types such as cashews were weaker as consumers traded away from items that had seen significant price increases. He also said SKIPPY had a softer first half after Hormel pulled some promotions following a fire at its Little Rock facility late last year, but added that recent four-week consumption data showed improvement.
Guidance Reaffirmed Despite Cost Headwinds
Management said the back half of the year is expected to deliver both sales and earnings growth, but the third quarter will face several pressures. Ettinger and Kuehneman cited higher fuel costs, elevated logistics expenses, pork and beef volatility and lower plant utilization tied to targeted inventory rebalancing.
Kuehneman said the inventory actions involve certain ambient products with longer shelf lives, including center-store canned items and SKIPPY. He characterized the move as a proactive step enabled by improved integrated business planning, adding that the impact is expected to be primarily in the third quarter.
Hormel said its full-year segment sales expectations remain unchanged: flat to low single-digit growth in retail, mid-single-digit growth in Foodservice and high-single-digit growth in international.
Asked whether reaching the upper end of the earnings range would require additional pricing, Kuehneman said that was not a key assumption. He said potential upside would more likely come from Foodservice overdelivery, continued turkey strength, favorable volume and mix, and commodity markets coming in below forecast.
Ettinger said the company expects the fourth quarter to carry most of the second-half earnings growth. He said Hormel is not assuming a major improvement in fuel, commodity or operational pressures, but believes business momentum and the absence of certain one-time events from last year should support results.
“We delivered a strong second quarter with growth from each segment and support from our supply chain,” Ettinger said in closing. “We are executing with discipline on pricing, costs, and how we prioritize.”
About Hormel Foods NYSE: HRL
Hormel Foods Corporation is a global branded foods company primarily engaged in the production, marketing and distribution of value-added, high-quality meat and food products. The company's portfolio spans a range of categories including refrigerated and frozen meats, pantry staples, specialty foods and shelf-stable items. Through manufacturing facilities located across North America and international markets, Hormel Foods supplies retail grocers, foodservice operators, convenience stores and e-commerce platforms.
Among its best-known brands, Hormel Foods produces SPAM® canned meats, Jennie-O® turkey products, Skippy® peanut butter and Applegate® natural and organic meats.
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