HORMEL FOODS CORP DE

Net sales and segment profit for each of the Company’s reportable segments are set forth below. The Company does not allocate deferred compensation, non-recurring expenses associated with the transform and modernize initiative, investment income, interest expense, or interest income to its segments when measuring performance. The Company also retains various other income and expenses at the corporate level. Equity in Earnings of Affiliates is included in segment profit; however, earnings attributable to the Company’s corporate venturing investments and noncontrolling interests are excluded. These items are included below as Net Unallocated Expense and Noncontrolling Interest when reconciling to Earnings Before Income Taxes.

The Company is an integrated enterprise, characterized by substantial intersegment cooperation, cost allocations, and sharing of assets. Therefore, the Company does not represent that these segments, if operated independently, would report the profit and other financial information shown below.

Retail

For the second quarter of fiscal 2024, volume growth from the bacon and emerging brands verticals was more than offset by declines in value-added meats. Net sales increased for many items, including Hormel® Black Label® bacon, the SPAM® family of products, Applegate® natural and organic meats, Hormel® Square Table™ entrees, and Planters® snack nuts. These gains were negated by a significant year-over-year volume and pricing decline for whole bird turkeys and lower net sales in the convenient meals and proteins vertical. For the first six months of fiscal 2024, net sales declined primarily as a result of significant year-over-year volume and pricing declines for whole bird turkeys.

For the second quarter and first six months of fiscal 2024, segment profit declined due to lower sales and higher SG&A, which included increased advertising investments. These factors more than offset the benefit from lower logistics expenses and supply chain improvement.

For the third quarter of fiscal 2024, Retail segment profit is expected to decline compared to prior year due to lower volume, lower commodity whole bird turkey prices, and pressure from the estimated impact of an unplanned production interruption at the Suffolk, Virginia, facility.

Foodservice

Volume and net sales growth in the second quarter of fiscal 2024 were driven primarily by strength across the bacon, premium prepared proteins and turkey categories. Products such as Hormel® Bacon 1™cooked bacon, Hormel® Fire Braised™meats, Austin Blues® smoked meats, Café H® globally inspired proteins and Corn Nuts® corn kernels each delivered double-digit net sales growth. For the first six months of fiscal 2024, volume and net sales growth was broad-based and across numerous categories

Segment profit increased for the second quarter and first six months of fiscal 2024 primarily due to higher sales and lower logistics expenses.

For the third quarter, Foodservice expects segment profit to be in line with prior year, with the impact from volume growth expected to be offset by higher SG&A compared to last year. Risks to this outlook include a softening of foodservice industry demand and higher-than-expected operating costs.

International

During the second quarter of fiscal 2024, double-digit volume and net sales increases for SPAM®luncheon meat and refrigerated exports were more than offset by lower commodity export volume and lower net sales in China. For the first six months of fiscal 2024, net sales declined, resulting from lower export sales and lower net sales in China.

Segment profit in the second quarter increased significantly, resulting from favorable costs in China, growth from our partnerships in the Philippines, South Korea, and Indonesia, as well as growth in Brazil. For the first six months of fiscal 2024, segment profit increased due to improvement from our international partnerships, favorable costs in China, and growth in Brazil.

In the third quarter of fiscal 2024, International anticipates segment profit to increase significantly compared to last year. This recovery is expected to be driven by improvement across the business, including increased branded exports, growth in China and Brazil, and contributions from our investments in the Philippines, South Korea, and Indonesia. Risks to this outlook include continued softness in China and commodity headwinds impacting the export business.

Unallocated Income and Expense

For the second quarter and first six months of fiscal 2024, net unallocated expense increased driven by transform and modernize initiative costs, the impact from pork antitrust litigation settlements, and higher employee-related expenses, partially offset by higher interest income and favorable rabbi trust performance.