HORMEL FOODS CORP DE

Volume, Net Sales, Earnings, and Diluted Earnings Per Share

(1) See the “Non-GAAP Measures” section below for a description of the Company’s use of measures not defined by United States (U.S.) Generally Accepted Accounting Principles (GAAP).

Volume and Net Sales

Net sales for the first quarter of fiscal 2025 decreased compared to the prior year, as the benefit from higher net sales in the Foodservice segment was more than offset by lower net sales in each of the Retail and International segments.

In the Foodservice segment, organic volume(1) and net sales growth in the first quarter of fiscal 2025 were primarily driven by strong performance across the premium prepared proteins, turkey, premium bacon, and breakfast sausage categories. Notable products such as branded Jennie-O® turkey items, Hormel® Fire Braised™meats, Café H® globally inspired proteins, and Cure 81® ham delivered strong volume and net sales growth.

In the Retail segment, many of the Company's key flagship and rising brands delivered net sales growth relative to last year, including the SPAM® family of products, Applegate® natural and organic meats, Hormel® Black Label® bacon, Jennie-O® ground turkey, Wholly® guacamole, and Hormel® pepperoni. As anticipated, lower sales of snack nuts due to impacts from the production disruption at the Suffolk, Virginia facility was a primary driver of year-over-year net sales declines.

In the International segment, net sales growth in China and branded exports were more than offset by softness in Brazil and lower commodity turkey exports.

In the second quarter of fiscal 2025, the Company expects net sales growth from each segment compared to the prior year.

Cost of Products Sold

Cost of products sold for the first quarter of fiscal 2025 increased due primarily to higher commodity input costs. On a per pound basis, cost of products sold for the first three months of fiscal 2025 increased compared to the prior year.

Gross Profit

For the first quarter of fiscal 2025, gross profit as a percent of net sales declined. Gross profit as a percent of net sales increased in the International segment and decreased for the Retail and Foodservice segments. All segments benefited from savings realized as part of the Company’s T&M initiative.

For the second quarter of fiscal 2025, the Company expects gross profit as a percent of net sales to decrease for each reporting segment compared to last year.

Selling, General, and Administrative (SG&A)

(1) See the “Non-GAAP Measures” section below for a description of the Company’s use of measures not defined by U.S. GAAP.

For the first quarter, SG&A and SG&A as a percent of net sales increased due to the loss on the sale of a non-core sow operation, employee-related expenses, and expenses related to the T&M initiative. Adjusted SG&A as a percent of net sales(1) increased compared to last year due to employee-related expenses.

Advertising investments in the first quarter were $43 million, a decrease of 2 percent compared to last year. The decline was partially due to lower support for the Planters® brand due to production disruptions at the Suffolk facility. The Company expects full-year advertising expense to increase compared to the prior year.

Equity in Earnings of Affiliates

Equity in earnings of affiliates for the first quarter of fiscal 2025 is comparable to the prior year as favorable results for MegaMex Foods, LLC, were offset by the Company’s international investments.

Interest and Investment Income and Interest Expense

Interest and investment income for the first quarter of fiscal 2025 decreased predominately due to performance from the rabbi trust. Interest expense increased in the first quarter of fiscal 2025 due to the prior year debt issuance.

Effective Tax Rate

The effective tax rate in the first quarter was 21.8% compared to 23.4% last year. The lower effective tax rate for the first three months of fiscal 2025 is primarily due to the purchase of federal transferable energy credits in the current year. The effective tax rate for fiscal 2025 is expected to be between 22.0% and 23.0%. For additional information, refer to Note L - Income Taxes of the Notes to the Consolidated Financial Statements.