HORMEL FOODS CORP /DE/

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

Volume and Net Sales

Volume and net sales decreased for the third quarter of fiscal 2026, while volume decreased and net sales increased for the first nine months of fiscal 2026.

For the third quarter of fiscal 2026, net sales increased in the Foodservice segment, while net sales declined in the Retail and International segments. The enterprise organic net sales decline was driven by weaker performance in commodity turkey, the bacon portfolio, and the strategic exit from select non-core private label snack nuts items, which more than offset strong growth in premium prepared proteins, the Jennie-O® turkey portfolio, contract manufacturing, and pizza toppings.

For the third quarter of fiscal 2026, volume decreased for all three segments, primarily driven by the commodity turkey portfolio.

For the first nine months of fiscal 2026, net sales growth in the Foodservice and International segments offset declines in the Retail segment. Strong enterprise performance across the Jennie-O® turkey portfolio, premium prepared proteins, and the Foodservice customized solutions business were key drivers of organic net sales growth. For the first nine months of fiscal 2026, volume declined in all three segments, driven primarily by the commodity turkey portfolio and 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 decreased for the third quarter of fiscal 2026. Lower volume and favorable pork input costs were partially offset by higher beef input costs and higher logistics expenses.

Cost of products sold increased for the first nine months of fiscal 2026, as lower volume, higher beef input costs, and higher logistics expenses were partially offset by favorable pork input costs.

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

Gross Profit

For the third quarter of fiscal 2026, gross profit as a percent of net sales decreased. For the first nine months of fiscal 2026, gross profit as a percent of net sales increased.

Gross profit as a percent of net sales increased for the Foodservice segment and decreased for the Retail and International segments in the third quarter and first nine months of fiscal 2026 compared to the prior year.

Selling, General, and Administrative (SG&A)

For the third quarter of fiscal 2026, SG&A and SG&A as a percent of net sales increased, driven primarily by a loss related to the Brazil divestiture and a litigation settlement. Adjusted SG&A and adjusted SG&A as a percent of net sales decreased, driven primarily by lower employee-related expenses and a reduction in marketing and advertising.

For the first nine months 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, a loss related to the Brazil divestiture, and a litigation settlement, which were partially offset by the gain on the sale of Justin's, LLC. Adjusted SG&A and adjusted SG&A as a percent of net sales decreased, driven primarily by a reduction in marketing and advertising.

Advertising investments in the third quarter of fiscal 2026 were $34 million, a decrease of 18 percent compared to the prior year, partially due to the timing of advertising campaigns. Advertising investments in the first nine months of fiscal 2026 were $108 million, down 10 percent compared to the prior year. In fiscal 2026, the Company expects advertising investments to be comparable to the prior year, as it continues to support its priority brands.

Equity in Earnings of Affiliates

Equity in earnings of affiliates for the third quarter and first nine months of fiscal 2026 decreased, primarily driven by a $48 million non-cash impairment charge related to a minority investment in Indonesia.

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

Interest income increased in the third quarter and the first nine months of fiscal 2026, as higher cash balances more than offset the impact of declining interest rates. For the third quarter and the first nine months of fiscal 2026, interest expense was marginally higher compared to the prior year. Other income decreased in the third quarter of fiscal 2026, primarily due to the performance of the rabbi trust. For the first nine months of fiscal 2026, other income increased primarily due to lower pension costs.

Effective Tax Rate

The effective tax rate in the third quarter of fiscal 2026 was 42.3% compared to 22.3% for the same period in the prior year, primarily due to the impact of the Brazil divestiture and the non-cash impairment charge related to a minority investment in Indonesia. For additional information, refer to Note M - Income Taxes of the Notes to the Consolidated Financial Statements.