HORMEL FOODS CORP /DE/

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

Volume and Net Sales

Net Sales increased for the first quarter of fiscal 2026 while volume decreased compared to the prior year.

For the first quarter of fiscal 2026, organic net sales growth across the enterprise were led by the Foodservice and International segments offset by declines in the Retail segment. Strong performance in our multinational businesses and our Foodservice customized solutions business, partially offset by the strategic exit from select non-core private label snack nut items, were the key drivers of net sales growth.

For the first quarter of fiscal 2026, organic volume increased marginally in the International segment, was comparable to the prior year in the Foodservice segment, and declined in the Retail segment, primarily driven by the strategic exit from select non-core private label snack nut items.

In fiscal 2026, the Company expects net sales growth, which assumes growth across a broad range of categories, increased brand support, and market-based pricing actions. Risks to this outlook include slowing consumer demand and commodity price fluctuations.

Cost of Products Sold

Cost of products sold for the first quarter of fiscal 2026 increased, primarily due to higher logistics expenses and higher commodity input costs, mainly for beef, pork trim, and nuts.

On a per pound basis, cost of products sold for the first quarter of fiscal 2026 increased compared to the prior year.

Gross Profit

For the first quarter of fiscal 2026, gross profit as a percent of net sales declined as gross profit improvement from the Foodservice segment was more than offset by declines in Retail and International. All segments benefited from market-based pricing actions and savings generated through the Company’s T&M initiative, which were offset by inflationary pressures.

Selling, General, and Administrative (SG&A)

For the first quarter of fiscal 2026, SG&A and SG&A as a percent of net sales decreased. The gain on the sale of the controlling equity interest in Justin’s, LLC and the lapping of a loss on the sale of a non-core sow operation in fiscal 2025 were partially offset by expenses associated with the corporate restructuring plan and Consulting Agreement. Adjusted SG&A was comparable to the prior year, as a reduction in marketing and advertising was offset by higher employee-related and legal expenses.

Advertising investments in the first quarter of fiscal 2026 were $41 million, a decrease of 6 percent compared to the prior year. In fiscal 2026, the Company intends to continue investing in its priority brands and for the 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 2026 decreased due to the results of MegaMex Foods, LLC, which were partially offset by favorable results from international investments.

Interest Income, Interest Expense, and Other Income (Expense), Net

Interest income declined in the first quarter of fiscal 2026, primarily due to lower interest rates. Interest expense marginally increased in the first quarter. Other income increased in the first quarter of fiscal 2026, primarily attributable to lower pension costs.

Effective Tax Rate

The effective tax rate in the first quarter of fiscal 2026 was 22.4% compared to 21.8% for the prior year, primarily due to an increase in stock option expirations in the first quarter of fiscal 2026. For additional information, refer to Note M - Income Taxes of the Notes to the Consolidated Financial Statements.

The effective tax rate for fiscal 2026 is expected to be between 21.5 and 22.5 percent.