AUSTIN, MINN. — Hormel Foods Corp.’s Refrigerated Foods segment, which includes such brands as Hormel, Natural Choice and Applegate, propelled the company’s performance during the fourth quarter and full year of fiscal 2018. Despite the impact of high freight costs and commodity pressures, particularly in pork, the business unit managed to generate profit growth of 25% and 5% during the fourth quarter and full year, respectively.
“Refrigerated Foods was able to deliver a 25% increase in profits, even as commodity profits declined 31%,” said James P. Snee, chairman, president and chief executive officer, during a conference call with analysts to discuss the results on Nov. 20. “The team was able to offset higher freight cost and higher advertising investments. I’m particularly proud of how the Refrigerated Foods team continues to shift the portfolio toward branded value-added products.”
Net income for Hormel Foods for the fourth quarter ended Oct. 28 was $261,406,000, equal to 49c per share on the common stock, up from $218,154,000, or 41c per share, during the same period of the previous year.
Quarterly sales rose to $2,524,697,000 from $2,492,608,000 the year prior.
The company’s other business units were challenged during the quarter. Operating profit for the Jennie-O Turkey Store business unit fell 31%, and Grocery Product unit operating profit fell 22%. Most notably, Hormel Foods took a $17 million non-cash impairment charge against its CytoSport business during the quarter that was applied to the Grocery Products unit.
Full-year net income rose to $1,012,140,000, or $1.91 per share, from $846,735,000, or $1.60 per share, the year prior.
Fiscal 2018 sales rose to $9,545,700,000 from $9,167,519,000.
“This year, we made excellent progress on our path forward that I laid out at our 2017 investor day,” Mr. Snee said. “This included becoming a broader food company, expanding and accelerating food service, becoming a more global company, reducing volatility, divesting nonstrategic assets and modernizing our supply chain. We will continue to execute against these initiatives in 2019.”
In fiscal 2019, Mr. Snee expects all four of Hormel’s business units to show sales growth. As a result, management set full-year earnings guidance at $1.77 to $1.91 per share and sales at $9.7 billion to $10.2 billion.
“Heading into 2019, we expect that (Grocery Products) business to show mid-single-digits growth,” Mr. Snee said. “Refrigerated Foods, it’s a lot more the same in terms of the value-added growth that we expect to see. We're not expecting anything crazy in JOTS (Jennie-O Turkey Store). I mean, we’ve got a low single-digit increase there, which we believe is very achievable. And then our International growth on the top line is really in line with our historic expectations of high single digit. So, (we) do believe that the guide on the sales is very realistic and achievable.”