Hormel Foods — Third Quarter Fiscal 2026 Earnings Summary

Financial Performance

• Net sales for the quarter ended July 26, 2026, were $2.96 billion, a 2.4% decrease year-over-year; organic net sales declined 2%.
• Operating income was $111 million compared to $240 million in the prior year period; operating margin was 3.7% versus 7.9% previously.
• Adjusted operating income was $266 million compared to $254 million in the prior year; adjusted operating margin was 9.0% versus 8.4%.
• Earnings before income taxes were $103 million compared to $237 million in the prior year.
• Diluted earnings per share (EPS) were $0.11 compared to $0.33 in the prior year; adjusted diluted EPS was $0.37 compared to $0.35.
• Cash flow from operations was $241 million, a 54% increase from the prior year.
• Significant discrete pre-tax items included a $56 million loss on the Brazil divestiture, a $48 million non-cash impairment charge related to an Indonesia investment, and a $38 million litigation settlement.
• The effective tax rate was 42.3% compared to 22.3% in the prior year.
• Cash on hand was $840 million at quarter end, an increase of $169 million from fiscal 2025.
• Inventories were $1.8 billion at quarter end, an increase of $54 million from fiscal 2025.
• The company returned $161 million to stockholders through dividends during the quarter.

Guidance and Future Outlook

• Fiscal 2026 net sales are expected to be $12.1 billion to $12.2 billion, reflecting organic net sales growth of 1% to 2%.
• Fiscal 2026 operating income guidance is updated to $0.83 billion to $0.87 billion, inclusive of estimated losses from the Brazil divestiture, an Indonesia impairment, and a litigation settlement.
• Fiscal 2026 adjusted operating income guidance is raised to $1.08 billion to $1.12 billion, reflecting 6% to 10% growth.
• Fiscal 2026 diluted EPS guidance is updated to $1.06 to $1.12.
• Fiscal 2026 adjusted diluted EPS guidance is raised to $1.45 to $1.51, reflecting 6% to 10% growth.
• The company expects to deliver adjusted earnings growth for the year consistent with, or above, its long-term algorithm.

Business Segments and Product Lines

• Retail: Volume down 9%; net sales down 4%; segment profit down 4%. Organic net sales decreased 3%. Growth was driven by the SPAM® family, Applegate® natural and organic meats, Hormel® chili, contract manufacturing, and Planters® snack nuts, partially offset by declines in commodity turkey and private label snack nuts.
• Foodservice: Volume down 1%; net sales up 2%; segment profit up 3%. This marked the 12th consecutive quarter of organic net sales growth. Growth was driven by premium prepared proteins, branded pepperoni, Jennie-O® turkey, Austin Blues® smoked meats, Hormel® Natural Choice® meats, and Hormel® Fire Braised™ meats.
• International: Volume down 11%; net sales down 5%; segment profit down 254%. Organic net sales declined 4%. Branded export demand remained resilient, but SPAM® export sales recognition was impacted by a one-time legal-entity transition. Segment profit was significantly impacted by a non-cash impairment charge, though adjusted segment profit was flat.

Market and Competitive Landscape

• The Foodservice segment outperformed industry trends.
• The consumer environment remains under pressure.
• The company is focusing its international strategy on markets with the strongest long-term growth opportunities.

Risks and Challenges

• Net sales were impacted by portfolio-shaping actions, lower commodity-based pricing, and a pressured consumer environment.
• Retail segment profit decreased due to lower net sales and higher logistics expenses.
• Foodservice segment profit was partially offset by higher logistics and selling, general, and administrative expenses.
• The International segment faced a non-cash impairment charge and a one-time legal-entity transition affecting sales recognition.
• Significant discrete items included a $56 million loss on the Brazil divestiture, a $48 million impairment, and a $38 million litigation settlement.

Management Commentary and Tone

• Jeff Ettinger, interim CEO, stated the company delivered solid third-quarter results, growing adjusted earnings and advancing fiscal 2026 objectives.
• John Ghingo, President and CEO-elect, noted progress against strategic priorities despite sales declines, citing strong performance in Retail priority brands and Foodservice outperformance.
• Management expressed confidence in disciplined execution and positioning the company for long-term success.

Other Key Points

• The company announced a definitive agreement to sell its Brazil operations (Ceratti® brand), classified as held for sale, which closed in the early part of the fourth quarter of fiscal 2026.
• The Brazil divestiture will be excluded from year-over-year comparisons in non-GAAP organic volume and organic net sales metrics beginning in the fourth quarter of fiscal 2026.
• Capital expenditures were $68 million, with the largest projects related to infrastructure enhancements and investments in data and technology.
• The company is a member of the S&P 500 Index and the S&P 500 Dividend Aristocrats.
• The company remains in a strong financial position with ample liquidity and a conservative level of debt.