Hormel Foods Corporation Barclays 19th Annual Global Consumer Conference

Heading into fiscal 2026, we had had a year in 2025 where we had driven top-line sales, and we wanted to maintain that momentum. But we weren't driving commensurate earnings growth, and that became really priority one as we headed into the last part of the planning cycle and heading into the year. We focused on a few different levers that we thought could help improve that profitability. First was pricing. We had been hit with a lot of raw material cost increases during the latter half of 2025, and sometimes it takes a little time to get the pricing through. But by early in the second quarter, we were done with that in both the retail and food service arenas. We wanted to improve mix, we wanted to improve productivity, and we are seeing enhanced margins as the year goes forward.

One of the things we had looked at was our SG&A trend was, it was just, frankly, growing too fast compared to what the company was growing, and we needed to remedy that. We took a number of steps late in the year and executed them early in the calendar year. Indeed, as we sit here right now, we're seeing a 20-basis point improvement on the percentage of SG&A, not counting advertising against organic net sales. That was the game plan. How are we doing against the game plan? It is a dynamic environment out there, so everybody's, I'm sure, been hearing about the consumer at all these different presentations, and Jon will talk a lot about the consumer here today as well. That's been a challenge. We have seen challenges in the freight and logistics area and with the Ukraine war and the spike in diesel costs, that has been something we have had to confront.

Ben, as I was chatting with you, even this morning as we get questions in our breakout sessions, people were asking, "Hey, a couple of the companies in your coverage universe are talking about, say, the pork cutout." Hormel does still have one pork processing plant. We used to have three, so we are not a particularly large player in that. Our exposure is quite a bit lower. We have seen some negative margins in pork cutout, but we sell a lot of value-added products in both retail and food service, and frankly, the lower cost of goods is a benefit in those areas. That is not really having a deleterious effect on us right now.

Where do we sit? We have actually been able to grow earnings this year by 6% through three quarters. Based on our guidance we provided for the full year, we are looking at a 6%-10% range, so we expect to grow it again in the fourth quarter. On the top line, we did grow first and second quarter. Third quarter, we had a miss, and we are looking to restore that kind of growth. But we think we will be comfortably within the 1%-2% growth range organically for the year. Overall, our priorities were to enhance collaboration, so we reacted more quickly to different circumstances, such as some of the ones I have outlined, to increase our productivity and efficiency, and I think we have been able to do that mostly this year.

I will take that one, Ben. Thank you. Q3 certainly had some moving parts, so I think it is worth walking through some of the critical ones, and then I will touch on Q4. Starting with the positives in Q3, we continued to see very good momentum on our food service business. Our food service business posted its 12th consecutive quarter of top-line growth. Our food service business now accounts for approximately one-third of our company sales and approximately half of our company segment profit. So growth on that business is particularly meaningful to the total company. We also like some of the momentum we saw on critical priority retail brands. If you look at our more poultry-based franchises in Jennie-O and Applegate, we saw nice consumption growth there. We saw growth on our Hormel Chili business and our canned center store portfolio. We saw growth on our refrigerated entrees.

We had growth on our Herdez brand, and importantly, we saw growth in the quarter on our Planters brand. We really like some of the momentum in retail. Additionally, from a profitability standpoint, in Q3, we made progress. We expanded our adjusted operating margins. We expanded and grew our adjusted EPS in the quarter. We felt good about that progress on profitability. On the other hand, I would say top-line results were more mixed in total. If you kind of break that down, we obviously had some near-term impacts from the portfolio shaping actions that we've been deliberate with in taking. On top of that, we saw some effects that we were expecting from an elasticity impact.

As you'll recall, we took two rounds of retail pricing late last year and early this year. Some of the volumes we saw come out were expected as a result of the elasticities. Then we did see a bit of softness on some of the other retail pieces beyond that as well. In total, if I kind of look at the quarter and then look forward to Q4, in Q4, we're going to continue to have some of that noise around the top line as a result of the portfolio shaping. But as Jeff mentioned, we are expecting to see some benefits of lower pork input costs in Q4. I think if you just look overall, we're being appropriately cautious with how we're walking into Q4, given the consumer and operating environment.

I also think my big takeaway from the Q3 call and the reaction to the call was, I think, if you look at the underlying performance of the business, the progress on the business, some of the momentum, I think it's stronger than some of the headlines and reactions to the earnings might suggest.

Well, let me start with where I think we are. I would say from a Hormel perspective, we are coming from a position of strength, and I say that for a couple of reasons. One, I do think the protein-centric nature of our portfolio gives us a unique opportunity to really catch consumer tailwinds. They are not short-term tailwinds. These are long-term tailwinds with some additional short-term momentum. But I think we have a real opportunity as consumers are seeking more convenient forms of protein, seeking more affordable proteins, willing to pay a premium for certain proteins, looking for flavor-forward protein solutions. We are that partner that can provide that. All of that opportunity sits upon a foundation which has been built over many years. A strong branded portfolio. We are leading position in 40 categories.