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 T&M initiative, gains or losses on the sale of businesses, 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

Net sales in the second quarter of fiscal 2025 were comparable to the prior year, as high-single-digit growth from both our Mexican portfolio and value-added turkey products was primarily offset by the impacts of promotional timing. Two-thirds of the Retail segment's volume decline in the quarter was due to lower commodity shipments and contract manufacturing. The segment's flagship and rising brands continued to hold leadership positions in their respective categories in the quarter. Notably, the Planters® brand exceeded volume and net sales expectations for the second quarter of fiscal 2025, while demand for Jennie-O® lean ground turkey remained strong.

For the first six months of fiscal 2025, net sales for the Retail segment declined, as growth from value-added turkey products, Applegate® natural and organic meats, the Mexican portfolio, and the SPAM® family of products was primarily offset by declines in branded and private label deli meats. Over one-half of the Retail segment’s volume decline for the first six months of fiscal 2025 was due to lower commodity shipments and contract manufacturing.

Retail segment profit increased in the second quarter of fiscal 2025, primarily due to benefits from operational efficiencies as part of the T&M initiative and favorable SG&A expenses. For the first six months of fiscal 2025, segment profit decreased due to lower net sales and higher raw material costs.

For the third quarter of fiscal 2025, Retail segment profit is anticipated to increase compared to the prior year, driven by top-line growth and year over year benefits from the T&M initiative.

Foodservice

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

Organic net sales(1) growth was broad-based in the Foodservice segment in the second quarter of fiscal 2025, with notable contributions from the customized solutions business and the turkey portfolio. Branded products such as Jennie-O®, Hormel® Fire Braised™ meats and Café H® globally inspired proteins delivered another quarter of strong volume and net sales growth. Several categories achieved volume growth in the second quarter of fiscal 2025, despite industry softness. Volume growth in these categories was more than offset by the impact of reduced commodity shipments.

For the first six months of fiscal 2025, organic net sales(1) growth in the Foodservice segment was led by the customized solutions business, the Jennie-O® turkey portfolio, and premium prepared proteins. Organic volume(1)was comparable to the prior year period.

Segment profit decreased for the second quarter and first six months of fiscal 2025 as higher net sales were more than offset by margin pressures, primarily in non-core businesses.

The Foodservice segment continued to benefit from an extensive range of solutions-based products, its direct-selling organization and a diverse channel presence during the second quarter and first six months of fiscal 2025.

For the third quarter of fiscal 2025, the Company expects Foodservice segment profit to increase compared to the prior year, driven by organic top-line growth.

International

Double-digit volume and net sales growth in exports, and robust growth in the China market drove top-line performance in the International segment in the second quarter of fiscal 2025. Strong shipments within the refrigerated portfolio, primarily of bacon and pepperoni, made the largest contribution to export growth. Our in-country China business continued to benefit from top-line momentum in both the retail and foodservice channels, supported by innovative product launches. For the first six months of fiscal 2025, the China market and exports were the largest contributors to top-line performance.

International segment profit decreased in the second quarter of fiscal 2025 as meaningful net sales growth was primarily offset by a temporary shift in export customer mix and softness in Brazil. For the first six months of fiscal 2025, segment profit declined, as net sales growth was primarily offset by softness in Brazil.

In the third quarter of fiscal 2025, the Company expects International segment profit to increase compared to the prior year. Value-added growth across China is expected to be partially offset by continued softness in Brazil.

Unallocated Income and Expense

For the second quarter of fiscal 2025, net unallocated expense increased driven by reduced interest income and unfavorable rabbi trust performance, which was partially offset by the absence of prior year pork antitrust litigation settlements. Net unallocated expense also increased for the first six months of fiscal 2025 due to these factors as well as the loss on sale of a non-core sow operation.