The paragraph is an introduction to the Hormel Foods Corporation's First Quarter Earnings Conference Call for fiscal year 2025. The Operator welcomes participants and explains that the call will include a presentation followed by a Q&A session. The call features Jess Blomberg, Director of Investor Relations, who introduces the key speakers: Jim Snee, CEO; Jacinth Smiley, CFO; and John Ghingo, Executive Vice President of the Retail segment. They will discuss the company's first quarter results and outlook for the year. Participants are informed about accessing call materials online and are reminded of the safe harbor statement concerning forward-looking comments. The Q&A session will follow the presentation, and a replay of the call will be available online for one year.

The paragraph discusses Hormel Foods' financial performance and strategies. It highlights that the company is providing non-GAAP financial measures for better understanding, alongside GAAP information. Jim Snee reports solid first-quarter results, with a 1% growth in organic net sales, driven by demand for key brands like Spam and Hormel. The company focuses on its value-added portfolio, which remains strong and relevant to customers, contributing to organic top-line growth. The retail strategy of concentrating on flagship and emerging brands has been effective in achieving these results.

In the third paragraph, the company highlights the growth and success of its key brands, including Spam, Applegate, and Hormel Black Label Bacon, driven by innovative marketing and product development. Spam has attracted younger consumers with initiatives like the sizzle marketing campaign and new offerings such as Spam Musubi. Applegate's success is attributed to meeting consumer values through high-quality, simple ingredients, and recent innovations like frozen breakfast items. Hormel Black Label Bacon continues to grow with products such as the easy-to-prepare Oven Ready bacon. Despite challenges in the macro environment, the company is optimistic about sustaining growth through these strategic efforts.

The retail momentum is driven by the recovery of the Planters brand, marking a significant improvement in the first quarter with actions such as enhanced fill rates, distribution, and innovation, including the introduction of five limited-time flavors. This brand, central to the "Here for the Snacks" campaign, along with others like Hormel Pepperoni and Hormel Chili, benefited from a shift to a comprehensive multi-brand media plan and a strategic ESPN partnership. The initiative improved retailer partnerships and significantly increased in-store displays. Looking forward, the retail segment is poised for continued growth, leveraging a diverse portfolio and innovative product launches to meet consumer demands for convenience and flavor, supported by ongoing advertising efforts.

The paragraph highlights the upcoming retirement of Mark Weber, the Group Vice President of Food Service at Hormel Foods, after 37 years, and the succession by David Weber. The food service segment has seen strong growth, particularly in premium prepared proteins, turkey, premium bacon, and breakfast sausage categories, with products like Jennie-O turkey, Hormel Fire Braised Meats, and Café H contributing to this success. The segment aims to maintain growth through a solutions-based portfolio and a knowledgeable direct selling team. Additionally, the international segment showed strong performance with global brands Spam and Skippy, and the introduction of barbecue bites in China bolstering the company's meat snacking strategy.

The paragraph discusses a company's strategic initiatives and future growth plans. It highlights the success of barbecue bites and a beneficial partnership with Garuda Food, which is aiding expansion into new markets. The company is focused on its Transform and Modernize initiative to revitalize its processes, portfolio, and value creation. This initiative is not aimed at cost savings but at generating growth through investments. There have been portfolio optimizations, including the divestment of a non-core sow farm operation. Fiscal 2025 is anticipated to be a milestone year, with an expected $100 million to $150 million in additional benefits. The paragraph concludes with a note on the CEO's retirement and the ongoing search for a successor, underscoring confidence in the company's future goals.

The company started the year strong, with the CEO expressing confidence in their strategy and team. Jacinth Smiley reported solid first-quarter results, with a 1% organic increase in net sales, reaching $3 billion. Growth was driven by the foodservice sector, retail segment improvements, and international growth, particularly in China. Gross profit margin was 15.9%, with challenges from commodity costs and supply chain issues. SG&A expenses increased by 2.5% due to employee costs, while $43 million was spent on advertising. The effective tax rate improved due to energy credits, and diluted earnings per share were $0.31, with adjusted earnings at $0.35. Operating cash flow for the quarter was $309 million.

The company invested $72 million in capital expenditures, focusing on increasing capacity and technology, and plans to spend $275 to $300 million in fiscal 2025 for similar purposes. They remain committed to dividend growth, paying their 386th consecutive quarterly dividend with a 3% increase. The company ended the first quarter with $2.9 billion in net debt, maintaining a low net debt to EBITDA ratio. Despite challenges from bird diseases and higher commodity costs, their value-added portfolio, including the Planters brand, performed well. Looking ahead, they anticipate steady retail sales, mid-single-digit growth in foodservice, and high single-digit international growth. They expect benefits from modernization efforts but face challenges like lower investment income and increased spending on personnel and technology. They anticipate a tough comparison for Planters' performance due to strong prior-year results.

The paragraph discusses the company's outlook and performance expectations. They are monitoring turkey supply chain pressures due to bird diseases but expect bottom-line results for the second quarter to be similar to the first quarter and lower than the previous year. However, they anticipate benefits from the recovery of the Planters brand, value-added turkey, and growth in the food service and international segments, particularly in China, in the second half. The company reaffirms full-year organic net sales growth of 1% to 3% and adjusted diluted net earnings per share of $1.58 to $1.72. Committed to strategic execution and initiatives like Transform and Modernize, they are confident in achieving their targets for sustainable growth. The paragraph concludes by transitioning to the Q&A session.

The paragraph is a discussion between Peter Galbo from Bank of America and Jim Snee about the company's Earnings Per Share (EPS) performance and future expectations. Peter inquires about the EPS cadence, noting that the first quarter was slightly below projections and expressing curiosity about the company's ability to boost EPS in the latter half of the year. Jim responds by reaffirming their confidence in achieving a strong second half, citing consistent performance in their value-added retail business, recovery of the Planters brand, favorable year-over-year comparisons, growth in food service, and expected steady international growth following a strong recovery in 2024.

The paragraph discusses challenges impacting Hormel's turkey supply chain, leading to strategic pricing decisions which will cause pressure in Q2 but benefits in Q3 and Q4. Jacinth Smiley notes that Planters and the "Transform and Modernize" initiative will significantly contribute to bottom-line growth, with strong growth expected from the rest of the value-added portfolio in the second half. Peter Galbo asks for details on the CEO succession process, emphasizing Hormel's tradition of internal promotions.

In the paragraph, Jim Snee addresses a question from Peter about the board's approach to selecting a new CEO. Snee emphasizes the board's responsibility to choose the right leader and expresses pride in developing the company's next wave of leaders. He highlights the importance of considering both internal and external candidates for the CEO role and stresses that the priority is to make the right choice rather than a quick one. Snee affirms his ongoing commitment to the company until the transition is complete, stating that he will remain engaged with the team and focused on achieving the company's 2025 goals, while also being available as a strategic advisor in the future.

In this paragraph, Ken Goldman from JPMorgan asks about the pressures on the turkey supply chain and the possibility of price increases despite stable whole bird turkey prices. Jim Snee responds by explaining that their approach involves strategic pricing actions across the entire turkey complex, emphasizing their value-added business in both retail and food service. He notes the presence of turkey illness in the supply chain and record-high prices in certain turkey categories as factors influencing their strategy. John Ghingo adds that this year is distinct from a turkey market perspective.

The paragraph discusses the increasing consumer interest in value-added turkey products, particularly ground turkey, as a lean protein source. This trend aligns with the needs of the GLP-1 community, which is exploring healthy food options. Jennie-O, a leading brand in ground turkey, has seen a 6% increase in volume in the first quarter, indicating strong demand in a growing category. The company is well-positioned to benefit from these trends, which are expected to be long-term. The speaker also congratulates Jim on his upcoming retirement.

Jim Snee addresses questions about the timing of his retirement announcement, which some perceived as sudden and unexpected. He explains that the board's primary responsibility is to ensure they select the right CEO, involving both internal and external considerations. Announcing the retirement now allows for a smoother recruitment process, as it's challenging to attract candidates when a current CEO has not announced their departure. Waiting could have increased pressure on the process and been unfair to the organization. The plan is for Jim to remain until the end of the year and to serve as a strategic advisor as needed.

In the paragraph, Jim Snee discusses the ongoing "Transform and Modernize" initiatives at his organization, emphasizing that it's a team effort rather than his sole responsibility. He believes these initiatives create a long-term growth mechanism, alleviating pressure on future leaders by allowing them time to develop their own plans for the future. Snee notes that this approach, while different from past practices, suits the evolving nature of the organization. Following his comments, Ken Goldman thanks him, and Heather Jones from Heather Jones Research follows up with a question about turkey supply, noting a significant decrease in availability and price changes in dark meat.

In the paragraph, Heather Jones asks about the company's assumptions regarding benefits from pricing changes in the turkey market, specifically whole birds, in their full-year outlook. Jacinth Smiley clarifies that their assumptions on whole birds remain unchanged, but they have adjusted their expectations based on pressures and pricing actions in other parts of the turkey supply chain. Heather then inquires about the company's comfort with projected EBIT growth of 15% to 25% by 2026, as implied at their 2023 analyst day. Jim Snee affirms their confidence in achieving the 2026 targets, aligning with previous discussions from their Q4 call, which focused on their Transform and Modernize strategy.

The company is experiencing a powerful growth momentum driven by its Transform and Modernize initiatives alongside underlying business growth in areas like retail, food service, and international sectors. They remain confident in this strategy but are not sharing specific details. Heather Jones expresses gratitude, and the operator introduces Rupesh Parikh from Oppenheimer with a question about future margins. Jim Snee acknowledges his retirement congratulations. Jacinth Smiley explains that while Q1 gross margins are down, Q2 margins are expected to be similar due to pressure from turkey supply and Planters nuts, with a full recovery expected in the year's second half. Jim Snee reiterates these points.

The paragraph discusses the company's financial outlook and recent internal changes. They expect lower gross margins compared to the previous year but anticipate improvement from Q1 to Q2, with turkey market dynamics affecting the second-quarter results. The company aims to drive growth and exceed historical margin levels in the future. John Ghingo reflects on his six-month tenure, noting significant positive changes within the company, particularly in transformation and modernization efforts. These changes are improving technology, data, and processes, allowing employees to elevate their work and decision-making. He also mentions encouraging progress in the retail business.

The paragraph discusses the positive impact of Jim's unified approach to retail, highlighting strong consumption momentum for Hormel's flagship and emerging brands, driven by their scale program in the snacks segment. The company benefits from a diverse and protein-rich brand portfolio, which positions it well in the food industry. Hormel aims to leverage its strengths in convenience, taste, and innovation to differentiate itself, focusing on consumer-driven opportunities such as nourishing snacks and protein-based meals. The speaker expresses optimism about current progress and future prospects.

The paragraph discusses the future performance of certain retail categories within a company's portfolio, particularly as they relate to growth projections for 2026. The speaker, John Ghingo, expresses confidence in the portfolio's breadth and strength, highlighting its range from affordable to premium brands, which provides resilience in various economic conditions. He emphasizes that consumer perception of value—which includes factors beyond just price—plays a significant role in their purchasing decisions. The company believes that this understanding of value positions it well to meet future targets.

The paragraph discusses the strength and resilience of a company's diverse brand portfolio, highlighting its alignment with consumer priorities such as quality, convenience, and value. The article provides specific examples from their portfolio: Applegate, which sees growth through organic and innovative products; Spam, growing in popularity among multicultural consumers; and Hormel Black Label Bacon, which is expanding through convenient product innovations. This diversified approach is credited with driving strong growth and setting the company up for sustainable long-term success.

In the paragraph, the speaker discusses the growth of Hormel's key brands in Q1, with a 3% increase in dollar and volume consumption, despite Planters still recovering. Excluding Planters, growth exceeds 5% compared to the previous year. The speaker expresses confidence in the company's portfolio and its potential for future growth through enhanced consumer insights, marketing, and investment. Jim Snee adds that supporting innovation is crucial for the company’s "Transform and Modernize" initiative, which includes reshaping the portfolio for growth and optimizing production efficiency to ensure the capacity to support this expansion. All these efforts are interconnected, giving them confidence in the retail business.

The paragraph discusses a discussion about advertising investments related to Planters and their market recovery strategy. Jim Snee acknowledges a temporary reduction in Planters' advertising investments to focus on market recovery after certain outages. He confirms plans for sequentially increasing marketing and advertising expenditures to achieve a full year of double-digit growth. Following this, there's an exchange between Thomas Palmer and John Ghingo, concerning Planters' distribution recovery and investment ramp-up. John Ghingo explains that the plant issues are resolved, and while distribution recovery is in progress, questions remain on the timeline for retail sales improvement and investment strategies between the second quarter and the latter half of the year.

The paragraph discusses the recovery and ongoing progress of the Suffolk facility in servicing Planters products. The company has addressed temporary distribution gaps caused by supply issues and is effectively regaining shelf space lost due to a lack of supply, with full recovery dependent on customer planogram resets. The company remains on track with its cost and investment projections, expecting continuous sequential progress throughout the remainder of the second quarter. Despite challenging year-over-year comparisons due to a strong performance in the previous second quarter, the company anticipates easier comparisons in the latter half of 2024 and plans to focus on advertising, promotions, and innovation as part of a three-part strategy.

The paragraph discusses the success and growth potential of Planters within the snacking category, highlighting new products like flavored cashews and nut duos that have attracted younger consumers. The company plans to expand these offerings in the second half of the year. Planters is positioned as a key player in the nourishing snacks market, offering substantial growth opportunities and acting as an anchor for Hormel's new retail strategy, including their "Here for the Snacks" program, alongside other Hormel snacking products. The paragraph ends by touching on inflationary pressures in input costs for pork, beef, and nuts, noting they are higher than expected, and mentioning pricing actions related to turkey.

In the discussion, Michael Lavery from Piper Sandler asks Jim Snee about how price mix versus volume is expected to affect the company's performance, particularly in light of strong turkey pricing in the second half. Jim Snee responds by highlighting the importance of Planters in their price mix strategy, noting its sequential improvement and its positive impact on their pricing dynamics. He mentions that as Planters continues to perform better, it will positively influence their financial results. Jacinth Smiley also affirms this perspective, suggesting that the improvements will show favorable year-over-year comparisons in the latter part of the year.

The paragraph discusses the company's pricing strategy and performance, specifically focusing on the center store portfolio and the strong momentum in retail and food service segments. It mentions that last year's second-quarter price increases are still affecting volume in the first quarter, but this impact will diminish in the second quarter. Michael Lavery asks about expected pricing trends, noting the strong price mix without the turkey segment. Jim Snee emphasizes the strength of the value-added portfolio across retail, food service, and international markets, highlighting the historical strength and broad-based top-line growth in the food service segment.

In the paragraph, company representatives discuss their business performance and expectations, specifically addressing volume and pricing dynamics in the retail sector. Michael Lavery inquires about anticipated volume trends, considering strong pricing and potential pressure on retail volume, particularly pointing out the impact of the Planters brand. Jim Snee responds by stating that despite challenges, such as lapping previous pricing impacts and pressures from the snack nuts segment, retail volume has remained relatively stable. He expresses confidence in their ability to maintain and grow both volume and sales due to the strength of their entire portfolio. Pooran Sharma then asks about the reduction in commodity exposure, questioning if it was an opportunistic move or due to specific events in the quarter. Jim Snee acknowledges the company's efforts to reduce commodity exposure over recent years and implies that this strategy is ongoing.

The paragraph discusses the strategic decision to divest from the hog live production business, specifically referencing the Mountain Prairie divestiture. The company recognizes that hog production is not aligned with its core capabilities and can introduce unwanted volatility. However, it remains committed to the hog harvesting aspect at its Austin, Minnesota facility. Additionally, Jacinth Smiley addresses progress on the "Transform and Modernize" initiatives, indicating a successful year in 2024 and a financial guide of $100 to $150 million for 2025, with expected growth continuing into the second half of the year.

The paragraph features a discussion during an earnings call where executives express confidence in achieving long-term goals by 2026, particularly regarding investments in enhancing inventory flow and distribution capacity. Pooran Sharma congratulates Jim Snee on an announcement, followed by operator instructions for questions. Max Gumport from BNP asks about the impact of turkey market performance on meeting the high end of the company's financial guidance. Jacinth Smiley responds by reiterating the company's commitment to achieving the high end of the guidance range, $1.72, as long as all contributing factors align, although they acknowledge potential variability in certain areas like turkey markets.

The paragraph discusses the progress and goals of a program called Transform and Modernize, which aims to drive $200 million in EBIT income from 2023 to 2026 and achieve savings of $100 to $115 million in the current year. Jim Snee emphasizes the ongoing growth and power of this program and mentions that by the end of fiscal year 2025, it will significantly contribute to the anticipated EBIT. The program is part of a broader strategy involving brand, people, and data reinvestments. Max Gumport suggests coordination with Jacinth to better understand the detailed breakdown of these targets. Overall, Transform and Modernize is positioned to be a strong contributor to the company's success.

In the closing remarks of a conference call, Jim Snee outlines the company's achievements and expectations. The company has achieved solid top-line results and is on track to meet its 2025 goals. This confidence is bolstered by a strong retail segment, growth in food service and international markets, the recovery of the Planters business, and the progress of the Transform and Modernize initiative. These factors are expected to drive long-term sustainable earnings growth. The call concludes with a thank you to participants.

This summary was generated with AI and may contain some inaccuracies.