HORMEL FOODS CORP /DE/

The Company is a global manufacturer and marketer of branded food products and remains focused on driving long-term growth through a balanced business model, a diverse portfolio, and a commitment to creating value for all stakeholders. The Company’s three reportable segments, Retail, Foodservice, and International, are described in Note Q - Segment Reporting in the Notes to the Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

The Company discloses certain measures not defined by United States (U.S.) Generally Accepted Accounting Principles (GAAP), including organic volume, organic net sales, adjusted selling, general and administrative (SG&A), adjusted SG&A as a percent of net sales, adjusted earnings before income taxes, and adjusted diluted earnings per share. The Company utilizes these non-GAAP measures to understand and evaluate operating performance on a consistent basis. For additional information and reconciliations to the most closely comparable measures calculated in accordance with GAAP, see the "Non-GAAP Measures" section of this Item.

Diluted earnings per share was $0.29 for the second quarter of fiscal 2026, down 12 percent compared to the same period last year. Adjusted diluted earnings per share for the second quarter of fiscal 2026 was $0.40, up 14 percent compared to the same period last year. Significant factors impacting the quarter are listed below. All comparisons are to the same period of the prior year unless otherwise noted.

•Net sales for the second quarter of fiscal 2026 increased 3 percent. Organic net sales increased 3 percent with growth across the Foodservice, International, and Retail segments.

•Total segment profit for the second quarter of fiscal 2026 increased 13 percent. Segment profit increased in the Retail, Foodservice, and International segments.

◦The increase in Retail segment profit was due to higher net sales, improved performance across the turkey manufacturing network, and lower SG&A. These benefits were partially offset by inflationary pressures in the logistics network.

◦The increase in Foodservice segment profit was driven primarily by net sales performance, which benefited from market-based pricing actions and modest volume growth. Segment profit also benefited from improved performance across the turkey manufacturing network.

◦The increase in International segment profit was primarily due to strong export performance and growth in China.

•Earnings before income taxes for the second quarter of fiscal 2026 decreased 11 percent, which was negatively impacted by the $61 million loss on the sale of the whole-bird turkey business. Adjusted earnings before income taxes increased 14 percent, as higher net sales and improved performance across the turkey manufacturing network were partially offset by higher logistics expenses.

•The pre-tax impact of non-recurring expenses related to the loss on the sale of the whole-bird turkey business and the Company’s Transform and Modernize (T&M) initiative in the second quarter of fiscal 2026 were $77 million, which was primarily recorded in SG&A.

Cash flow from operations was $528 million for the first six months of fiscal 2026, a 44 percent increase primarily due to the impact of an inventory build in the second quarter of fiscal 2025.

Entering the second half of fiscal 2026, the external environment remains dynamic, with continued volatility associated with macroeconomic and geopolitical conditions. The Company is actively working to mitigate the impact of these conditions. However, continued pressure from the external environment, at a level greater than expected, could have an adverse impact on results of operations.