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Hormel Foods (HRL)

Participants
Nathan Annis Director of Investor Relations
Jim Snee Chairman, President & Chief Executive Officer
Jim Sheehan Executive Vice President & Chief Financial Officer
Eric Larson Buckingham Research Group
Ken Zaslow Bank of Montreal
Thomas Palmer JPMorgan
Ben Bienvenu Stephens
Michael Lavery Piper Jaffray
Heather Jones Heather Jones Research
Robert Moskow Crédit Suisse
Rupesh Parikh Oppenheimer
Adam Samuelson Goldman Sachs
Rebecca Scheuneman Morningstar
Peter Galbo Bank of America
Benjamin Theurer Barclays
Call transcript
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Operator

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Hormel Foods’ Fourth Quarter 2019 Earnings Release Call. At this time, all participants are in a listen-only mode.

As a reminder, this conference is being recorded Tuesday, November 26, 2019.

I’d now like to turn the conference over to Nathan Annis, Director of Investor Relations. Mr. ahead, go Please Annis.

Nathan Annis

Eastern. to of Foods our fiscal the X:XX morning Welcome the results call fourth before AM around opened quarter XXXX. market the morning. conference Hormel for this Good We released

you If you did under it receive a hormelfoods.com our at Investors can the website copy on the find of not release, section.

provide call President Vice Officer; will Executive Sheehan, Executive review and President Jim financial today Chief a and Jim Officer. Chairman Snee, performance segment be is our for for our the XXXX. following Jim each quarter will Chief On and remarks. and of Board, for Financial open our Sheehan and the outlook will of further Sheehan’s provide Jim results line Jim to relating assumptions questions outlook. Snee The detailed

courtesy question analysts, yourself please As the other up. limit with follow a to to one one

you today will question, An be to additional posted code AM XX:XX audio have It Time. and for is is the XXXXXXX. to of access be XXX-XXX-XXXX back queue. available this one replay you are and call will archived The dial-in website Central in year. at the our number also welcome If Standard beginning get

reference I started, we Harbor Before get the Safe statement. need to

XX-Q to actual refer made website. pages will comments be accessed the XX the on by can the more be expressed XX ended of for Some details. in implied quarter XXXX Please for our differ be through results our forward-looking today materially and may or those July will Form It company’s from statement making. XX, in we

volume sales understanding of divestiture. CytoSport provide to non-GAAP impact by better of note the excluding a the the performance please Additionally, uses with results company company’s and operating the investors

press organic will detailed to corporate these as results Discussion in on we that and note non-GAAP sales. release on our non-GAAP organic refer during our call, information located is Please volume website. our

I call will Snee. over the Jim now turn to

Jim Snee

strategy at company's Nathan. October. in our to morning, outline the Investor growth We everyone. opportunity had Good Day you, Thank our

in XXXX well in and priorities of the growth presented protecting The a growth brands; future. initiatives. foodservice six continuing and and supply company Orion global XXXX through core Deli path for growing expanding bold we two, our up to cuisines; businesses; four, innovations; forward, new into strategic our one, chain five, priorities Our set were, and accelerating sets our us transform ethnic six, presence; pursuing our three, one Project six

a venture, Refrigerated Deli progress sales Notably, These made priorities another Foods; global for and MegaMex harvest hog We represent its XXXX. Turkey Hormel tremendous bird on completed which celebrated as in joint non-strategic Solutions $XXX Jennie-O food in Store; whole division delivered at million step two Hormel the Project chain launched great forward supply Orion initiatives. one our our and and businesses, company. also our exited progress Fremont, in facility state-of-the-art CytoSport Foods branded Nebraska; anniversary; we from XXth made and

XXth highest the our long-term common in history. and Reduced annual million repurchase XXth consecutive our double-digit dividend our consecutive Repurchased our the pizza $XXX $XXX topping business Burke financial an From cost our projects grew our facility and sales improved Fontanini X%, and back operating by a of line, grew raised production year for we into stock, as balance. cash year, such in capital margins. over increases. Invested with organic perspective, million structure the additional the debt

Braised, and Natural brands of earnings XX% as a Choice a profits in perspective, X, growth. all growth. meaningful Fire Label, The Foods commodity delivered value-added businesses Refrigerated in contributors From Applegate Black Bacon spite decline segment were grew to our strong value-added

record by its for I'm brands grew Dinty Herdez, sales, year, accomplishment. proud had also year say, a volume driven organic which Grocery the sales Products is a to Moore. really of Wholly mixed SPAM of We year as had such tremendous results. and fifth and consecutive

and butter pressure pricing the due sales competitive to declined SKIPPY dynamics peanut However, in deflationary for category. face we as profits

rally team did and category using identify revenue tactics growth management to for promotional excellent to job our right Our drive number growth an the pricing with of customers a customers.

line excellent generate to top-line continues higher growth. were From the and tax lap MegaMex a a they declined impacted earnings perspective, bottom by markets during avocado benefit as year.

are Jennie-O remains both effects the is recalls. business lean making fourth decision. oversupply the right strong and investment that brand long-term Turkey and through XXXX. This two Store team managed Jennie-O the the the into going has Turkey The industry of proved quarter additional Ground we clearly momentum in

disappointing. segment The were results the year for full International

team swine global and business. the headwinds China, the China growth greatly our in challenges, African impact encountered stemming from excellent trade uncertainty. These tariffs in fever As numerous from masked

at Investor Day of in October. end fourth the the earnings quarter, year delivered per Looking at put our share we This our earnings of range $X.XX. full the we provided guidance top at

growth. Sales Three of decreased X% sales Products delivered organic segments, Grocery and sales and Foods, led Bacon X% X% on growth brands Herdez, a volume and in on X%. sales increase volume. Natural Gatherings, Fire X% four our Hormel as volume. Columbus, Choice, Foods volume decrease X, increased sales a Wholly, in Braised, by grew company SPAM, Refrigerated and Total was Organic such Chili. Jennie-O, X% Refrigerated

I Bacon growing and seeing is if doing team The deli growth the from the While remiss excellent didn't X many X. to products Bacon out be foodservice Hormel contributed I growth, account-by-account. across would foodservice call an are we retail, sales job

into the Thick also brand under recently channel Cut Hormel product club the the introduced Reserve. We

able decline businesses from of decline XX% Foods X%. in a providing runway segment profit Wichita, was business. our profits, The Refrigerated continue facility important not recent to necessary at commodity leading the to a in earnings growing overcome this expansion Kansas our value-added to is Strong growth

declined quarter. XX% this and Skippy to volume and Lower increased sales Herdez such due drove volume brands declined as of divestiture and and growth. Peanut Center-store sales a sales Products Organic X%. X% increased Grocery CytoSport. pricing the remained earnings organic X% SPAM Butter headwind on

X% X%, improvements operational supply due across increased primarily Segment sales sales and to due whole X% profit to commodity and their increased volume chain. Store Turkey bird Jennie-O increased increases.

As but to customer, to expected, still at recently item, our distribution lean in to distribution work order our on gained We most distribution we a get pre-recall ground levels. have are large regaining important back back Turkey. do

Advertising markets key that in quarter to note, growth the time grew select volume, the important also and we quarter promotional profit It's this drive since helped represents activities XXXX Store. first during quarter. segment Turkey and fourth of sales at Jennie-O the

our profit protein and declined during sales to quarter. sales prices. We weakness export International our dramatically saw Brazil in in business volume higher due and segment the

these We are taking increases. the cost pricing to offset actions necessary

X% organic sales we XXXX. sales X% key growth deliver perspective, are across company to of in drivers e-commerce. fiscal growth company goal total a and From expect our sales Two innovation growth in to excess to the

and remain as First, innovation year we on we of across our successes to the in continue XX% by our confident final business close XXXX see challenge.

XX%. innovated Snacks & last achieve just Wraps, important goal. The five and Applegate grown SKIPPY Blend Minis all under Salsa, are Natural percentage the Choice sales has of products such Stacks Jelly and P.B. XX% Burger our in years at us Products as from initiatives Herdez Guacamole the help

strong grocery especially analytics, expansion; Second, our see our year customer double-digit for to of for growth optimization efforts package pickup the Through segments. we e-commerce. capabilities and e-commerce in another online continue improve,

XXXX. operating of to We year in growth deliver income another expect

factor our the fever biggest The continues be to impact swine African could risk business. have on

to much sustained market, have in increase expected. A details production, the and in Sheehan related cold higher factors the of in and will not domestic volatility and seen a as major of have lower storage we seen we are more Jim pork presumably pork consumer check. higher provide costs keeping industry of outlook. levels combination our in China we demand Chinese prices While market

very manage still in through are We ability our confident to ASF.

for are Hormel very pizza looking pizza coming whether products from like toppings, our our SPAM using premium items affordable and protein family or family versatile our a Columbus we an optimistic for up craft a demand Deli First, and chain of our charcuterie about the meats like regional products. from consumer looking

Second, during ability we which PEDV conditions and the This we in to us positions be our the again pricing We during XXXX. XXXX leadership in affords many the demonstrated when market to in compete. pass leaders in weren’t. ability run-up market higher pricing hold of categories

it and in we lead a As branded leader believe to responsibility in our food a situations. company is global these the industry,

volatility expect fiscal into Finally, input to persist XXXX. cost we

As market our can when swings lags quarter-to-quarter profits major protein, buyer pricing a from shift of the net market.

four profit first expect Looking the they as as and growth for We do at sales led the Grocery units Moore to expect with of our sales segments segment show Products business the for brands such by center the rest and Products the for growth, profit of and CytoSport three SKIPPY. store SPAM, segment, the half Dinty of XXXX, divestiture year. Grocery we being lap, exception the however

growing as continue Refrigerated We our and products bringing remain authentic also Wholly they by excited expect the I and and innovative Avocados. in Herdez, Herdez to MegaMex am brand. Sauces extremely the the to ability Herdez confident Street Wholly marketplace Smashed such Taqueria and are from Guacamole, growth

We Turkey lost expect in slowly fundamentals ground business Jennie-O and this distribution, the will Turkey our growth a for clear cost regaining to on improving growth mode. will efforts represent focus Store. gives structure get back A lean return to we XXXX industry us realign confidence

show to XXXX. International and growth is sales profit segment expected in

as and picture. in global an However, China to noise input manage related to we expect we higher in volatility addition do uncertain short-term costs Brazil trade

deli. led I marketplace by sales many expect a have grow high to Refrigerated confidence the we this level projects. value-added Again and and to brands and across in this year, continue team's grow retail in execute Foods ability branded of foodservice, profits will

we to supply achieved million we happening this year. pleased At highlighted I our cost Day, report; group. the our within work goal And savings Investor am great chain $XX

increases We prior our year. holding the also cost X% key of results less to over long-standing than highlighted controllable

we can over have time. targeted single investments structure to While impact large cost year, actions our a improve specific

in at we factors setting year to full key billion. these our $X.XX per billion all to approximately sales share XXXX $X.X into at our our $XX X% savings account, $X.XX to XXXX. earnings guidance million result Achieving and guidance $XX.X implies Taking of similar are

growth pre-tax XXXX to our our Investor goal fiscal of at pre-tax near-term X% earnings we growth organic expected earnings in rate line outlined is with Our Day. organic X%

CytoSport contributed $X.XX As in per a to share. XXXX earnings reminder, earnings

We effective in fiscal tax also expect a XXXX. rate higher

I time, assumptions key will relating this the fiscal to At financial over discuss information call and our Jim to quarter Sheehan for turn XXXX. the to

Jim Sheehan

X%. of earnings with down Organic $X.X down up Organic million, XXXX fourth sales X%. the you, Pre-tax X%. last Jim. to sales were were to net for were billion, quarter up Good growth. year. showing compared quarter up X% Sales Thank everyone. three the $XXX four $X.X were sales morning, were segments in Net billion, fourth X%

rate XXXX, XXXX The year. tax For tax to The effective remeasurements. a grew deferred billion, tax increase. was was XX.X% year rate XX.X% $X.X full by last the to earnings X% company pre-tax compared impacted

and the XX.X%. to the XX.X% per The year. rate effective tax a for $X.XX between The share was is Earnings share expected for the effective Earnings $X.XX X% lower year. compared tax decline. $X.XX, contributed for rate to XXXX XXXX was for last higher quarter earnings the and share be to quarter a per

For of to increase. XXXX, last the and to In SG&A, excluding due as was compared decline expenses. lower sale to advertising, CytoSport sales expect a employee-related and year. percentage selling X.X% X.X% SG&A XXXX, of was sales The we impact the of

expenses CytoSport, legal increase of sale and lower Orion. on costs unallocated resulting quarter. first a from of CytoSport, in Project the Net Excluding will significantly in down expenses the expense related because gain XXXX, the selling was settlement to the

to sale. down our The In Label, and Advertising Herdez, CytoSport million brands, in Black Natural advertising was from expense Jennie-O. increase decline $XXX $XXX to plan support including leading the Choice, Wholly, XXXX. SKIPPY due SPAM, was XXXX, we million, to

in margins we anticipate In For operating to the year, SG&A flat, XX.X% XXXX. in was but Lower XXXX. full may volatility to were benefit compared a input experience margins of periods XXXX, be due to margins costs. to XX.X% operating we

year, resulted of dividends, from costs and higher were reduction, down we The to inventory cash million repurchases. decline higher capital input CapEx as primary XXXX from in We of $XXX generated working cash the African of in uses due anticipation share during strategically built The operations debt fever. XX%. swine

XX November $X.XX at paid XXXth annual per rate quarterly of consecutive an We effective our dividend, share.

the for announced XX% the year XXXX, also XXth making new the consecutive consecutive XXth dividend increases. $X.XX We we increase share. and This have double-digit year rate per dividend of increased an marks annual the

products. with expenditures XXXX the capacity we acquisition. of XXXX, expansion debt Columbus $XXX remaining Fontanini Orion including were associated In facility Project and in Burke $XXX the the Capital repaid for million, additional for million the

million value-added targeted totaled in with We shares $XXX projects XXXX, on X.X repurchases capital expenditures repurchased. million were any double single for capacity and a focus $XXX of automation. year. million, Share record almost prior XXXX a

to approach through disciplined to capital allocations sheet take continue and will We grow balance capital to utilizing a our investments. strong acquisitions

focused return. exceptional on to investments remain shareholder long-term drive will We

The generally prices in China, guidance The swine to spreads supply line Europe. fever African the as quarter Southeast range higher Asia were key the input expectations. continues of the fourth with hog costs parts global inputs. disease higher protein XXXX for for assumes impact in and

is XXXX. in USDA. The X% need production to projecting To USDA the exports X% meet to for exports, domestic increase according to growing expected X% is X% the grow to total to

expected prices to Our in the value in XX% We are in of increase increases with hog to composite excess anticipate consistent USDA prices. be XXXX. increases

projected be of periods marginally volatility. to Selling with prices in higher XXXX are

XXXX. expect data Turkey show beginning markets industry shows is The trim of since beginning placements in X% of We XXXX. beef to turkey down pork and higher Industry recovery. be to signs the

to whole Additionally, birds pricing. cold storage improved decline leading to of continued

the was the over of modestly Cold near quarter over X% traded meat the fourth majority holiday up is see Breast of realized season. pricing the for breast past XXXX storage has XX below XXXX. last pricing $X year. should benefit months. We Pricing meat for the

the expect XXXX. We market in second to the of half improve

XXXX XXXX Freight costs from Turkey to progress meat to better supply pricing continues in were up other to such projected proteins. Project should commodity marginally year. Other shortages due next which as Orion on schedule. modestly items, be competing to fire higher on benefit compared are

quarter across we and HR, begin chain first of the In the organization. XXXX, supply Finance implementation will

capabilities and of manage We to business. transformation to company our the excited analytical increase are begin our our efficiency to

to the portion for question-and-answer time, the call. I'll call operator the of the over this turn At

Operator

from go you. will Group. question Instructions] Larson Please now with Eric Buckingham We Thank our first take Research [Operator ahead.

Eric Larson

Yes, all. everyone. Happy Thanksgiving good A morning, to

Jim Snee

Good Thanks, Eric. morning.

Eric Larson

we build inventory A saw the quick outlined, question. fairly end a We the significant of year. saw at Jim -- as

how costs first for portion So -- you the good that of the we how ability or near-term to cover that a with your does does Or look it folks? much cost your should at Is it give visibility inventory? half XXXX? control

Jim Sheehan

Eric. This Thanksgiving, is Jim Sheehan. Happy

Eric Larson

Jim. Thanks,

Jim Sheehan

some We end inventory the will did give at primals the the that into important on visibility build and year of first quarter. us

would say first the into I So well quarter.

Eric Larson

the marketing has then CytoSport. follow-up on sharply bumped real of Okay. you been campaign, your very as question a in with spending Thanks. also mainly here. for year Jennie-O was quickly up your down But just It spend And which successful. was your divestiture burger

CytoSport on number? have for down to apples-to-apples it up, were been I an how your flat you that if marketing look at So should look mean, slightly? to spend the year excluding at basis would we spend marketing

Jim Snee

flat. Eric, that for it was say I relatively would the year

Choice, of spread But well time dollars consolidate advertising when One we've really widely. about things able the we brands that think little used we've have key against a where over been more some of to in little dollars is our Jennie-O you done to Store SPAM, changed and the in work our has with Natural with our now select getting that a Turkey bit. with SKIPPY, advertising key back Hormel markets, really done with game with efforts we've focus Pepperoni the

the but would flat -- full for the year. relatively pleased with and say so we've results dollars been the And

Operator

We now question go Ken next from Bank our of ahead. Please will Montreal. with take Zaslow

Ken Zaslow

Good morning, guys.

Jim Snee

Hi, Ken.

Jim Sheehan

Good morning.

Ken Zaslow

projects is about What's on Just talked two underway. state-of-the-art, well put production, One much you questions. that? as in you that pizza sausage you The return that? toppings, into plans the capital how are the as the two

you've like on the gotten discuss underlying of you be It And Or there. leave And Is opening? on that? the that because fundamentals. more it more side. my turkey seems on I'll would question can the second positive trade

Jim Snee

first, Okay. Ken. second one I'll start with the

do being as when story it's business, talked out And we turkey into quarter. positive are is we head terms do we set you able to In -- really to what last to we of the the very XXXX.

been distribution. fourth about gain to the need to some quarter. that back of we've talked the We regain And distribution able in

gaining but more to see that headwinds. able we work with to expect distribution, off several had we backed support improvement only advertising as a last facing back appropriate years we of we're those do that the throughout not have some being that but We for And, the for really just progress of as year, business full dollars the to course, do sequential year.

we're $XXX will In regards be to two the two we about that -- to million roughly talked going them expansion combined. projects between the of

As a Burke growth. in the announced some of we that quite with a when these spent the value-added we ways of both money along. that message the reminder, our key we they're already have are project supporting and is Again, here remember to projects

the business, in business. to our does new it with our has The business designed plant Columbus performed well, is but organization, the incredibly support foodservice organization. Burke core only supports Nebraska it and in same Burke pizza Not support the which our thing topping

So to the really to not excited them those support but business. only projects, have we're announce come online

Ken Zaslow

Thank Yeah. you.

Operator

[Operator Please with JPMorgan. will Instructions] from We take question next our go Thomas ahead. Palmer now

Thomas Palmer

the Good morning. Thanks question. for

Jim Snee

morning. Good

Thomas Palmer

First, I just guidance. clarify to wanted

Your EPS guidance range is $X.XX.

range, of $X.XX income pre-tax I Your explain about think, it the can variance.

explain $X.XX. rate tax around Your guidance can

give So of applying that for we help I'm what the you clarity gap, And reconcile $X.XX then, could exactly a gap? should growth us getting number that that some also, kind just $X.XX XXXX maybe on be from? is base

Jim Snee

find along mean, Yes. CytoSport, to how higher our Thomas about included rate target. with growth Grocery that's the our when really tax I X% Products is of you results think best $X.XX it, $X.XX, organic about segment growth X% to a with our XXXX, about in EPS line in that where in consider then And profit. I is for which think you'll that way

with follow-up base. to free tax number, probably X.XX, XXXX you feel about Nathan. would if at a I you actual say, really additional XX, there's information thinking as at Cyto need, So to X, X.XX And gets

Thomas Palmer

It and input probably export then, were like on was a issues. Thanks side the it just bit. then rising two there international costs. the segment, for sounded And Okay. follow-up that. little main will I'll

you On segment? your the export the some into front, sales, pork were because did shift exports of Refrigerated weak

that pricing through? reference instituting, we the And you lag, segment? the exports sounds And back input an assuming you given the assuming like terms now-ish. you continue flow What that about kind reallocation. is of just of you that get to increases made as in were to Are Refrigerated, bounce think then on but then the there in offset, price you cost front, are

to understand that out? Just trying how plays

Jim Snee

Sure.

We've we two SPAM to Let our got export branded try would then international, there's think strong around export you talk business you. more help When export components. a and SKIPPY, and about me pork in our business. And really business.

two are there So parts.

And is was as XXXX, And the timing really think issue. branded about it about about piece about being business fourth pork driven quarter, soft in bit really we export the by more a of happened that's everything you our we - fresh strong. marketplace. that although, to When expected in be a driven talked little the think that's

slowed, As uncertainty global And of Asia the continue throughout about especially going resolved. gets of the and trade you tariffs be a to has how the think to some until of headwind pork region. reorganization global that's all

the first piece. So piece, that's the export

cost in kind The a throughout constant the year. in run The of second Brazil, fourth of piece in saw the up we terms impact increases biggest quarter. really

to But of input And really aggressive with more little and year. get and so driving that's expect we increases exports next moderate some costs Brazil. in quarter pricing the around did those fourth in then comments what's a those cost we our

Jim Sheehan

$X.XX in that about was reduction gain. $X.XX question. think first should unallocated on tax there Grocery of CytoSport, $X.XX your the about was gain. to then you out back $X.XX a it And a Products, net think through Thomas When you came

can the how think that's you $X.XX. So about

Operator

from our Please Ben take ahead. now Bienvenu will question next with go We Stephens.

Ben Bienvenu

morning. Good thanks. Hi,

Jim Snee

Good morning.

Ben Bienvenu

spend distribution ask what you'd results your more improved are curious thought demonstration impressive or hear large with factors I the dollars I consistent back to the driving that that and particular, get in trade or just that I'm to mentioned, Do a in really improvement there. with is about execution? And factor won larger have of conversion is results customer. customers. you you distribution it allocate professional wanted back additional to to Jennie-O, sequential or noteworthy,

Jim Snee

Yes.

was quarter. team commentary was And pleased to mean, So the the did when distribution, get in what where that consistent not And we've very able I have the that done with are retailer. as that perform the with lose distribution the for provided to the performing category did expected. category it's we we we tended fourth

take of brand the able been what select able we're so to the to course, story the And And leading about do of talked being then supporting that it. very in remind with of markets. powerful. and We've has we key are some advertising retailers

win we We are the trade dollars, especially the into big supporting XXXX. at head it off gain the distribution is here outset. as with But

that would Also more work do. have we remind you to

JOTS in pre-recall work we still So more a distribution year. the regained business, have lap we have do reminder and then are really throughout just year some the QX. in to for but early sales we And going as to the

we JOTS when to the take the fourth So you year, starting able business, the with what are very, quarter. very total get optimistic in done about we've been

Ben Bienvenu

Okay, question a then follow-up great. on And guidance.

the the the we Just the results some implication the the of of maybe kind the bottom thinking or given it's with of you've considered end considering swine inflation key for of and we magnitude progress cost price of of about range some monitor the that top whether year. should the be fever, other versus that inflation sort that as factors dictate timing factors that associated there, swing African end

Jim Snee

an you more on mean, from we tariffs well, we of I see Sure. to the lifted – than anticipated. would we just to drive the ASF in consider other then at that things If side. an JOTS really the talked towards regards international about flow event are obviously top mean, thing a risk product. is the and less I factor talked those that that normalized back we're perspective. key in and And if a we us hit are more about gain distribution is faster able of comments

costs that be the as up that impact bottom the continue a ASF steady as headwind. with we're But side, could costs But really catching increases that's up. about once in to range. margins if better of is the On pricing of sustained be the in that's compress side about thinking top on bottom moderate, we'll position. much we're way and a side And how and talked we

Operator

We'll now go our Lavery Piper Jaffray. question take ahead. Michael with next from Please

Michael Lavery

morning. you. Good Thank

Jim Snee

Hi, Michael.

Michael Lavery

just expect you a didn't I scenario? you this, into for increases how case that that magnitude I minute. a that what protein ask is -- somebody compare expectation was do hope to And factor your when mentioned off but guidance, have you does just you already base in the now?

Jim Snee

Certainly.

Hogs probably is And in half let's in half anticipate see went frame. with the in So first half. fourth With start time the the were cutout the prices digits. up in that about go going hogs. we with X% up to compared go single higher it XX% higher prices to back they'll quarter We quarter second in just of up XX% they're over think XX% the the similar belly quarter. XXXX XX% half, bellies the fourth value a under XXXX. rate we up go that compared run and we to first consistent The up will was fairly up low think and with first that across and the

XXX we've bellies volatility seen they're markets. a in belly right bit now the now, Now a are up lot of but so lower little

single where an seen digits the of market. trim, day-to-day in XX% quarter. moves up fourth the high look already was And is in bit we've quarter. in so higher up little they've as in today, course they They're X% it So with half. a seen even We at at significant were back think probably they'll input, which some then of prices a be $XX fourth important belly the XXXX the run-up in we from

noise trim say, but that bellies the the seeing and we us us. will and those be always it quarters. In to between able we'll volatility watch will recover create end will important be some as in volatility that. We'll you're -- the volatility So for to costs

Michael Lavery

very initially It a you language of that helpful. that that's Bacon How lot also But you're Bacon mentioned that's sound of but just some a X same grow? follow-up then of put brands to still about a mentioned expect maybe And on either and you like for growth. for key optimistic. to outlook drivers are as energy the question your in that prepared of quite And you list. Okay, then the we wasn't then first bullish going paragraph, Fire remarks behind. certainly guidance Do the few X some reads this Braised, there? which think not the do on

Jim Snee

I are the very I are the the in release, Yeah. not brands with business, that we bullish. those. those grown mean, Michael, are growing mean, on only today's I we're mean, against we really the trend that we all have And consumer. had are press and ones core but innovating

the And happens about by growth and our of brands Bacon account especially operates. really foodservice for those X opportunities and that's brands, about account hallmark the how foodservice Braised, our when business a it you growth X talk of space in talked very, foodservice Bacon our Fire both and are still how very We strong.

saturate It's operator dominate key the ability to and brands. community the with penetrate, these

the of that have business. Wichita, needs Bacon capacity X also for completed obviously the year for plenty facility last Kansas expansion We meet of we our to as

The reserve that prepared lot remarks X into other in about the consumer is the club now channel of with we're thing brand, acceptance. we our a under the fact met talked Bacon that where Thick moving it's Cut

food we core Bacon deli the for not both section. prepared X we service about opportunities only business talk and foods in represent even Fire the and in the feel they that So then about Braised, good didn't

all those, have along release. in on that with we the brands both of press our listed bullish very So,

Operator

our We Instructions] take Research. now with [Operator next Jones will question from Heather Heather Jones

Heather Jones

Good morning.

Jim Snee

Morning.

Jim Sheehan

Morning.

Heather Jones

corporate question quick expense. a detailed Look, I on have

XXXX just rate down and be taking from was sale out that even the gain about considerably wondering, all, thinking So should XXXX? for I how on it we and was XXXX. run

Jim Sheehan

a would so expenses. We For target Heather. it employee-related big percentage the XXXX. the It's number, small had We million a small $XX impact. also selling have had $XX lowered gain XXXX, CytoSport expenses. million I lower changes in our we've to in range, But

I But in see showing programs of the that would we range. in Some put $XX cost-saving $XX their place to million SG&A. are in the impact million it

Heather Jones

Jennie-O, Thank is question. then And you for second my a that. question on Okay. two-part

remember, So you I from what net breast buyer a of guys are meat.

over, the I -- guess, if this you the cetera, the higher? would you part meat dark is breast about rather more to go would in of business rather this that be bird of, business meat So would well, sense that at or thinking go -- should pick all, I higher simplistically, exports up for be et

Jim Sheehan

people we of announcement of take really, regards there every And, opportunities. here chain to approved. are We I our that we at are for still Obviously, announcement We're very us. that was the Heather, of to learned to and Yeah. year. working course, in details. opening high the advantage a But our supply positive level, mean, market that plants the just through of China the changes able and recently. seven that navigate be an have expect

Operator

question our now Moskow take will Please ahead. We Robert from Crédit with next go Suisse.

Robert Moskow

second Jim, the But Jim full that be half. thanks to for increase the forecast Happy inflation said and be Hey, your I XX% Thanksgiving. and the the for first value to guess half year. than a you expected cutout the then that's in higher

And have half And bit -- an like for first a out I don't of then that how single-digit I that's So follow-up. a inventories running second frozen your the quite you then prepared of of think about China. customers you does it if increase? are kind have type And it, and a indicate know pretty how is thinking sharp because in half? like I mean, in spikes run-up that higher you

Jim Snee

half. first think we few it. That We're being second and it just is thinking not how percentage between a difference the about about the

the we a see in run-up So don't significant market.

Jim Sheehan

really had if is And there what what's it $X PEDV. $X.XX months. about pricing up, with a in belly is happened at there mean, From example think regards to run-up happened if or the I there prices in -- run-up it for $X.XX -- to a -- I you went $X.XX Rob, three in perspective was to pricing, we've dramatic talked a what

market $X.XX And on we were warranted shelf, $X.XX. And to to you able back customers usually $X.XX happened to what it to if take that. and went that bacon the go understood was pricing,

And the markets Really think be a customer that it's for been I and customers. to we've to conversations with how about we've year depending talking here. not now surprise precedent And a so a over weren't on pricing there's the ASF the had anyone. going -- the

Robert Moskow

detail itself. fourth little you into Can give us a Okay. quarter more

that of something pricing all inflation adjust in enough there then and were you bellies quickly maybe yourselves? quickly it you hard of see different? able to movement made timing accordingly? and a Or lot change similar react. Did Or of for your to kind the it competitors said One was was very to reversed that

Jim Snee

right and quarter XXX. fourth the in bellies are XXX about now averaged at Bellies

two So you've seen in years. but some the movement volatility for seen bellies last you've

quarter So anything we've I that say wouldn't quarter amount unusual. is first our into of in the fourth in seen early volatility and bellies

Jim Sheehan

pricing front. retail Yes. And on a to of from perspective, the really nothing speak

we business talk but on our to able Some that foodservice was little adjustments nothing impactful. we're foodservice about a always how to closer bit but the with stay overly markets

Operator

go Oppenheimer. Please question We take Rupesh from our will ahead. Parikh now with next

Rupesh Parikh

my taking for thanks Good morning question. and

interest discussed plants So I about this guys foodservice launch so thinking the I from on wanted of seeing how this are contribution and happy far? to little type launch follow-up you're curious that year? was Day. And Analyst you you what retailer guys at the the

Jim Snee

be going is about space. to us, minimal Rupesh for in contribution it's the XXXX. learning the that Really Yes,

and a foodservice at has is probably in little Another been consumer We're the acceptance more the seeing space. reception level the retailer positive.

team And into operators. so a nice the has introducing foodservice pack same job with that it foodservice done retail

at blend In Day. items Investor of about addition, just talked the burger we some that

intrigued I'll really should say on taking team then be agile that also X.X about the we of forms working we're So the our blended combination different out already thinking very build marketplace. to to and the play the that is line, that it's by play pure

and positive, -- contribution on for the based it's early still the in I but any line, path look meaningful that read, build we're So heading XXXX. wouldn't down out to

Rupesh Parikh

Okay, then quick a And great. question. follow-up

year contemplate full the does the for guidance, targets? at that EPS buybacks all than So share

Jim Sheehan

intrinsic the value options share we amount the for of stock It and on our And does that share take into repurchase. being account are exercised offset of stock dilution. face repurchase some

number a in have do we So there.

So yes.

Operator

take ahead. with Goldman Please Adam from our now question next will We Samuelson Sachs. go

Adam Samuelson

thank Good Yes, everyone. morning, you.

before, that and components I cutout hog XX% a of the So as then in lower a costs. talked correctly increase the so on trim about XX% guidance in increase prices, port values, And you on cutout. you heard bellies follow-up, comments Sheehan a in Jim but or if increases

the likely butts we the to that that inflation you the there's So be and of more typically to trying opportunities understand and hams, you the think should inflation shoulders long do ones imply cuts cuts take that that seem that. contribution you on think would actually in? just piece be present profit that there's other that in more I'm to that present? would would Because side of the commodity

Jim Sheehan

Adam. Yeah,

Hams fourth I think example in early week. or is right a up hams now. $XX -- quarter to late in $XX good and averaged they're last the

hams that wouldn't would you're some say you I normally in So see. inflation seeing

So some I the of opportunities would there's commodities. in say other

Adam Samuelson

with -- of gross been fully a guidance, profit in believe margins back And Okay. margins high talk level would you think -- increases SG&A, kind out? a strip in sales. you have XXXX have a gross Do at year-on-year and taking then sense the can gross just CytoSport I'm clean of the embedded I in be least, about step you a the at to percent about get talked advertising I is expansion would operating what profit up. we strip what profit of trying guidance in as if

SG&A? understand So I'm just context trying of sure to the that make in higher I

Jim Sheehan

in the the that's we're increase without advertising talking that and talking we're in the about single we're costs we're for high off instance about digits advertising expecting Well, costs, seeing base CytoSport.

cost in have going SG&A. to implementation some we're SG&A, Orion going You're higher to because see

run that unusual a would say from I'd be rate. those So

that about in talking because Orion implementation We'll we're Project SG&A couple start will some the expenses unusually implementation that. So start with of next of high the in actually some weeks. of

Jim Sheehan

would I X% to that's pre-tax or with out I or Day. And at X% organic in really the with corporate. is that we Investor And, growth say, profit Adam, message mean, here detailed Nathan for -- that the laid us, operating you the line some items, certainly of more follow-up target that we

Operator

ahead. We from Scheuneman will question with next Please Rebecca now our Morningstar. take go

Rebecca Scheuneman

China? Thank SPAM XXXX. you're Good And thinking on given kind I mean, popularity probably about your of business. you're I demand that probably what and assume and the pork kind like business, positive that I'd of that that We've impact I'm how to to of opportunities, about on increasing we're just you expect expecting the a ASF seeing impact But there's the But wondering, you Yes. export morning. some for to your in brand hear lot talked have JOTS ASF that you. business, some your cost risk. impact SPAM way expect

Jim Snee

a price And domestically a in -- understand ASF business It's scenario the we that that's talked I we've question. when higher Yes. our bigger really, really high China. the results or we to prices. And see in lot impact event that think a a ASF, in about at fully ability good had, or level in have whether larger with our scale

couple speak. strongest SPAM that in remember, this pricing saw, is category over based the the of have be some in year we did years. has market, brand a you, And the it's so with if The buildup brand SPAM to we'd the you only that take probably that a by expenses some pricing of some of but last our of To we power. honest runoff in not itself, on

happening have scenario demand. with pricing do of than what's do SPAM, that. of We're is need and exceeded we our the and all fundamentals To a SPAM we to are where do closely with we've that expectations if to And watching to build incredibly expected. pricing take been we point, modeled It's have out positive. able take China faster to in really we we'll even we But again. if positioned And that. distribution your supply

Rebecca Scheuneman

follow-up, in have are I today? strong a the to maybe you're you -- China. you storage? so acceleration growth experiencing Okay. know brand that's due like, delayed But an And in the seen cold high then, very as Or

Jim Snee

SPAM? -- are In regard you talking about

Rebecca Scheuneman

Yes. Yes.

Jim Snee

SPAM mean, we our the plant in growth even exceed growth some exceeded we has to model in but We've been I higher been the expectations, of Yes. had, of in expectations able the the the when distribution has costs. putting steady, Jiaxing, in that China. it spite line

Rebecca Scheuneman

much. so you Thank Great. Okay.

Operator

Bank question from next now Please take our Peter Galbo of with ahead. We go will America.

Peter Galbo

question. Hey, guys. for Good morning. taking Thanks my

Jim Snee

Peter. Hi, Yes.

Peter Galbo

just wanted of high on on to goes offset is would ask assuming of range pepperoni? some that guidance. kind of some sales Jim, what to I to the through bacon end of the the pricing expecting. the assume like or is I in guess, demand would things be you you're that elasticity assuming what inflation kind are increases helpful price relation though any

Jim Snee

during would the vary Peter saw, volumes from from category. again the we in I'll $X.XX go very brand. where end do mean, driven elasticity across I Yes, unit cost and go you're saw have pricing results $X.XX, vary across strong saw the we $X.XX, to of that that from and really go what in and you right. business we bacon event, to the by still belly the coming and we high scenario back What retails PEDV reference be is saw higher And $X.XX ASF. prices $X.XX

to opportunity strength, to And does power having that referenced with versus the and the incredibly we business in retailers then the the that customers organization are and business sensitive so but our get closely it the the and cost. working business, obviously the category a to that comments story we category, tell direct-selling just having products also to front from is of vary very in of brand our solution foodservice the in brand as

Peter Galbo

Got it.

that spilled helpful. into And year, of one. extra week Jennie-O, an of kind Thanksgiving possible side? late volume is quick Okay, XQ you've thinking about we over there On be as the that's being maybe that this one could as maybe I mean shipments clean it just got with on then as should that's up be

Jim Snee

No. thought about really I mean haven't it that we way.

Still the like XXXX. into got next across we're early going the that's we've And seeing finish much Really of bring why Just Turkey. lean from business. have few year as obviously for to right those for We're on the line. again, but as wins of this we signs is ground key pre-recall wins XXXX. lapping reminder, this JOTS the for they last sales working QX takeaway some a the so we're momentum head into feel and distribution we still really

Operator

We question last will Theurer with go Benjamin our ahead. take Please Barclays. now from

Benjamin Theurer

a follow-up Just morning, good on quick Hey, Jim the Jim CapEx. and

quarter of like last full for kind year. $XXX guiding were realized you million So for

delays Burke plan for a of spent bit were As some $XXX the quarter? you And segment million. you pizza a all was Columbus? little is third on what split it the Is up what in CapEx already down of actually $XXX and lay what in get related each the facility like, significant million the XXXX? just from bit then you toppings, elaborate to if then is between Could new increase going you Can in things said there of to the going is what Project could the and you little look the to a ended Nebraska that in couple spending Orion. in

Jim Sheehan

Thanks, Benjamin.

on finishing up the at but Burke to the of those projects and close was the and I'll had are we to what we to going expansion are our three refer correct. $XXX expansion. looking acquisition more Originally numbers. the to XXXX fall Nathan the of get thought. breakout do property in You to early And big the stages detail Columbus to The project, I'll we're of million expected you that in than bit -- little you refer Columbus you in the Orion a of little to we for thought we into that increase with a correct got Project actual what to XXXX the is faster bit

Benjamin Theurer

increase Okay, you of the us purchases already the prepared clarified then decrease But the an can on idea for give perfect. was much of And a little to bit ago, actually understand how inventory, be you've CytoSport? the get we on to divestiture exclude of to comparison have CytoSport been just So, the of would of if increase? to a the like-for-like year have a actual would how inventory magnitude clean because ASF.

Jim Snee

range. Certainly. CytoSport in $XX inventory ran million that

Operator

turn additional session. I'd Q&A to the for back the to it now remarks. like concludes This speakers or closing any

Jim Snee

successful thank the here members So listening work tireless To you our of us of so your team allows in Foods, today. our you at thank for for team on be joining marketplace. in, Hormel to that all company all to the behalf you

Your our culture truly focus is on Happy uncommon. accountability of delivering our key maintaining and results Thanksgiving.

Operator

your participation. today's concludes Thank This for call. you

disconnect. You now may