HORMEL FOODS CORP /DE/

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

Volume and Net Sales

Net Sales increased and volume decreased for the second quarter and first six months of fiscal 2026 compared to the prior year.

For the second quarter of fiscal 2026, each segment contributed to organic net sales growth. Strong enterprise performance across the turkey portfolio, Foodservice customized solutions business, contract manufacturing, the pepperoni portfolio, and Applegate® products were key drivers of organic net sales growth.

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

For the first six months of fiscal 2026, net sales growth in the Foodservice and International segments offset declines in the Retail segment. Strong enterprise performance across the turkey portfolio, Foodservice customized solutions business, premium prepared proteins, the pepperoni portfolio, and contract manufacturing were key drivers of organic net sales growth. For the first six months of fiscal 2026, volume grew in the Foodservice and International segments and declined in the Retail segment.

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 increased for the second quarter and first six months of fiscal 2026. Higher commodity input costs and higher logistics expenses were partially offset by improved performance in the turkey manufacturing network.

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

Gross Profit

For the second quarter and first six months of fiscal 2026, gross profit as a percent of net sales increased. Gross profit as a percent of net sales increased for the Retail, Foodservice, and International segments compared to the prior year.

Selling, General, and Administrative (SG&A)

For the second quarter of fiscal 2026, SG&A and SG&A as a percent of net sales increased, driven primarily by the loss on the sale of the whole-bird turkey business. Adjusted SG&A increased, driven primarily by increased expenses related to legal matters. Adjusted SG&A as a percent of net sales was flat to the prior year.

For the first six months of fiscal 2026, SG&A and SG&A as a percent of net sales increased, due to the loss on the sale of the whole-bird turkey business, partially offset by the gain on the sale of Justin's, LLC and lapping the loss on the sale of a non-core sow operation. Adjusted SG&A increased, driven primarily by increased expenses related to legal matters. Adjusted SG&A as a percent of net sales was comparable to the prior year.

Advertising investments in the second quarter of fiscal 2026 were $34 million, a decrease of 7 percent compared to the prior year. Advertising investments in the first six months of fiscal 2026 were $75 million, down 6 percent compared to the prior year. The declines were partially due to the timing of advertising campaigns. In fiscal 2026, the Company intends to increase advertising expense as it continues to invest in its priority brands.

Equity in Earnings of Affiliates

Equity in earnings of affiliates for the second quarter and first six months of fiscal 2026 increased driven by the results of MegaMex Foods, LLC.

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

Interest income increased in the second quarter as higher average cash balances more than offset the impact of declining interest rates. For the first six months of fiscal 2026, interest income decreased, as lower interest rates more than offset the benefit of modestly higher cash balances. Other income increased in the second quarter and first six months of fiscal 2026, primarily driven by the investment gains within the rabbi trust.

Effective Tax Rate

The effective tax rate in the second quarter of fiscal 2026 was 23.6% compared to 22.0% for the prior year, primarily due to the impact of the whole-bird turkey transaction in the second quarter of fiscal 2026. For additional information, refer to Note O - 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.