Hormel Foods Corporation 2026 Q3 Earnings Call

Welcome to the Hormel Foods conference call for the third quarter of fiscal 2026. We released results this morning before the market opened. If you did not receive a copy of the release, you can find it on our website, hormelfoods.com, under the Investors section, along with supplemental slide materials. On our call today is Jeff Ettinger, Interim Chief Executive Officer, John Ghingo, President and Chief Executive Officer Elect, and Paul Kuehneman, Interim Chief Financial Officer and Controller. Jeff, John, and Paul will review the company's fiscal 2026 third quarter results and provide a perspective on the remainder of the year. We will conclude with the Q&A portion of the call. The line will be open for questions following the prepared remarks. As a courtesy to the other participants, please limit yourself to one question with one follow-up.

At the conclusion of this morning's call, a webcast replay will be posted to the Investors section of our website and archived for one year. Before we get started this morning, I'd like to reference our safe harbor statement. Some of the comments we make today will be forward-looking, and actual results may differ materially from those expressed in or implied by the statements we will be making. Please refer to our most recent annual report on Form 10-K and quarterly reports on Form 10-Q, which can be accessed on our website under the Investors section. Additionally, please note we will be discussing certain non-GAAP financial measures this morning. Management believes that doing so provides investors with a better understanding of the company's underlying operating performance.

The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Further information about our non-GAAP financial measures, including comparability items and reconciliations, are detailed in our press release, which can be accessed on our website. I will now turn the call over to Jeff Ettinger.

Thank you, Jess, and good morning, everyone. Earlier this year, I outlined priorities for Hormel Foods that could be summarized into three areas: strengthen execution, realize the benefits of the actions we had taken to improve profitability, and foster greater collaboration across the enterprise. As we review the third quarter results today, I am pleased by the progress we have made against each of these priorities. I would characterize Q3 as a solid quarter, though admittedly not as strong as Q2. Our team remained focused on delivering profitable growth, and that focus contributed to another quarter of earnings growth as adjusted earnings per share increased 6% versus last year. On the top line, results were more mixed. Organic net sales declined, with much of the pressure coming from deliberate portfolio shaping actions, reduced commodity markets, and a still pressured consumer environment.

At the same time, we continue to see positive momentum across many of the more strategic parts of our portfolio. Importantly, these results build upon strong year-to-date performance. Through the first nine months of the fiscal year, we have increased organic net sales, delivered strong adjusted earnings growth, and strengthened the underlying fundamentals of the business. Our year-to-date results, combined with our expectations for the fourth quarter, give us the confidence to raise and narrow our fiscal 2026 adjusted earnings outlook to a new range of $1.45 to $1.51, compared to our prior range of $1.43 to $1.51. We remain confident in delivering fiscal 2026 adjusted earnings growth consistent with or above our long-term algorithm. We have also tightened our full-year organic net sales growth expectation to 1%-2% from our prior range of 1%-4%, better reflecting current market and consumer conditions.

Before I conclude my remarks, I want to take a moment to recognize and congratulate John Ghingo on his appointment as the next Chief Executive Officer of Hormel Foods. Over the last year, John and I have developed a strong partnership. We have had the opportunity to work side by side on virtually every significant matter facing the company. Together, alongside our leadership team, we have shaped our operational priorities, investment decisions, portfolio strategy, and long-term growth plans. Building upon his background of more than 25 years of leadership across the consumer packaged goods industry, including six years in three important roles at Hormel Foods, John is more than ready for his new role. I have a deep appreciation for his commitment to our people, customers, shareholders, and the communities where we operate. I am very confident that Hormel Foods is well-positioned for its exciting next chapter under John's leadership.

I would also like to take a moment to thank our investors and the broader investment community for your engagement, feedback, and support over the last year. While this is my last earnings call, I am looking forward to spending time on the road meeting with many of you over the next couple of months. It has been both a privilege and a rewarding experience to serve the company this past year. With that, I will turn the call over to John to discuss the quarter in more detail and share his perspective on the opportunities ahead.

Thank you. Before I discuss the quarter, I want to thank Jeff for his leadership and partnership over the past year. I have benefited tremendously from his counsel, experience, and commitment to Hormel Foods as we work together to navigate a period of change while positioning the company for the future. Jeff's impact on Hormel extends far beyond the past year, and we are fortunate that we will continue to benefit from his perspective and leadership as a member of our board of directors. While this is Jeff's final earnings call as interim CEO, I look forward to continuing our engagement with investors, customers, and employees as we finish out the fiscal year. I am honored to lead Hormel Foods as its next Chief Executive Officer. This is a company with a rich history of protein innovation, a distinctive culture, and an incredibly talented team.

I have spent considerable time evaluating our business through a clear lens, where we are winning, where we need to improve, and which capabilities matter most to creating long-term value. What gives me confidence is that the fundamental strengths of Hormel Foods remain firmly in place. We have a portfolio of beloved brands, strong positions in attractive categories, a differentiated Foodservice business, a strategic international footprint, and a balance sheet that provides flexibility. At the same time, we have identified opportunities to improve execution, simplify portions of our business, and sharpen our allocation of resources toward higher potential growth opportunities. The work we are doing today is designed to build a stronger Hormel Foods over the long term. With that context, let me begin with our third quarter results. While there were several moving pieces during the quarter, we remained focused on disciplined execution and delivered adjusted earnings growth.

Net sales declined modestly, reflecting portfolio shaping actions, softer commodity markets, and a challenged consumer environment. While adjusted operating margins improved versus the prior year. Let's walk through the key drivers and results for each of our segments, starting with Foodservice. In Q3, we delivered our 12th consecutive quarter of organic net sales growth, continuing to outperform in an industry facing softer traffic trends and ongoing macro pressure. Our growth remained broad-based across channels, customers, and product platforms, reflecting the durability of our portfolio and the strength of our category positions. Premium prepared proteins and branded pepperoni were particularly strong contributors during the quarter, reflecting our ability to align with operator demand for differentiated value-added solutions. Importantly, our top-line results were achieved despite the impact of lower commodity-based pricing in portions of the business. Foodservice profit growth once again outpaced sales performance, driving another quarter of margin expansion.

This reflects our disciplined focus on mixed management and profitability. Foodservice segment continues to benefit from the power of our operator focus model and our direct sales organization, both of which allow us to identify emerging trends, solve real customer challenges, and capture opportunities. Foodservice remains a key driver for the company and an important contributor to both top-line momentum and earnings performance. In Retail, as I mentioned last quarter, we expected a noisier top line in the back half of the year. The divestiture of our whole-bird turkey business and the exit from certain private label snack nut products weighed on year-over-year net sales comparisons. These actions, along with pricing elasticities and a challenging consumer environment, also affected volume during the quarter. While many of these factors were anticipated, the impact on volume was somewhat greater than we originally expected.

These dynamics affected our short-term performance, but they reinforced the importance of the long-term actions we are taking to improve the quality of our business and focus our resources on higher growth, higher margin opportunities. Importantly, the work we are doing to strengthen our protein centric offerings is translating into marketplace momentum for our priority brands, with several delivering net sales growth in the quarter and continuing to gain traction with consumers. Sales of JENNIE-O® Ground Turkey and the Applegate portfolio grew this quarter, benefiting from sustained demand for protein-rich offerings. Hormel Chili and our refrigerated entrees also delivered dollar sales growth, reflecting consumers' desire for convenient, versatile, and flavor-forward meal solutions. Planters also delivered a strong quarter, fueled by impactful in-store activations and continued investment behind the brand.

Offerings such as the limited time flavor displays for America 250 enhanced visibility, drove consumer engagement, and reinforced Planters' leadership in the category. At the same time, we continue to advance our focus on e-commerce and digital media. While still early, the results are encouraging and reinforce our confidence in this iconic brand. Across retail, we continue to shift a greater share of our marketing investment towards retailer media and digital channels, enabling more targeted, relevant, and measurable consumer engagement. This evolution will continue through the fourth quarter as we further strengthen our capabilities. Over time, we expect these efforts will improve the effectiveness and efficiency of our marketing investments, allowing us to allocate more resources toward higher return brand building activities. Shifting now to international. While the quarter was impacted by some unique items that Paul will cover in more detail, our long-term opportunity remains highly compelling.