The paragraph provides an introduction to Hormel Foods Corporation's Second Quarter Earnings Conference Call for fiscal 2025. It includes housekeeping details like the call being in listen-only mode, instructions for the question-and-answer session, and information about the availability of the earnings release and supplemental materials on Hormel's website. Key speakers on the call include Jess Blomberg, Jim Snee, Jacinth Smiley, and John Ghingo. The paragraph also notes that a replay will be available on the Investors section of the website, and it references Hormel's Safe Harbor statements regarding forward-looking comments and non-GAAP financial measures.

The paragraph discusses the company's commitment to providing a better understanding of its operating performance to investors through non-GAAP financial measures, which are detailed in their press release. Jim Snee then highlights the company's solid organic growth and consistent results despite a challenging environment. The focus remains on delivering profitable growth and maintaining leadership in the retail market by offering quality, differentiated, innovative, and convenient products. The success of the Applegate brand is emphasized, noting its alignment with consumer demand for convenient protein solutions and its notable sales growth. Recent initiatives include the launch of a Convenience Breakfast platform and a new line of lightly-breaded chicken products.

The paragraph discusses the sustained growth and strategic importance of several brands within a company's portfolio. The Applegate brand is highlighted for its innovation and value proposition, while Jennie-O lean ground turkey meets the growing consumer demand for lean, high-protein foods. The transformation of the Jennie-O business aligns with a demand-driven strategy, supporting long-term growth. The Mexican foods portfolio is also thriving, with legacy Herdez salsa and refrigerated guacamole experiencing significant consumption growth. An expanded refrigerated entrees line now includes el pastor. The broader retail portfolio caters to consumer demands for quality and convenience. Despite overall industry weakness, the company's foodservice business has shown resilience, with strong performance from branded products like Jennie-O and Hormel Fire Braised meats, supported by effective sales strategies and a diverse channel presence.

The paragraph highlights Hormel Foodservice's commitment to innovation and meeting consumer needs through its diversified product portfolio. It showcases recent product developments, such as Fontanini hot honey sausage and FLASH 180 Sous Vide chicken, which enhance convenience and flavor trends. The paragraph also emphasizes Hormel's strong growth in international markets, particularly in China, driven by customer and distribution expansions. It underscores the company's strategic approach to maintaining momentum and adapting to market changes while consistently providing high-quality, innovative products.

The paragraph outlines the company's optimistic outlook for the second half, driven by consumer-centric, protein-focused products. It anticipates growth from the Planters and SPAM brands, with Planters showing strong second-quarter performance and expected continued sales growth due to its diverse product range. The SPAM brand, already impressive in the first half, is expected to continue thriving by expanding its market presence and resonating with cultural trends, such as the popularity of SPAM Musubi and a recent film collaboration in Hawaii, reinforcing its cultural significance.

The company is optimistic about its growth in the latter half of the year, expecting a 2% to 3% increase in net sales driven by strong execution, strategic initiatives, and contributions from its Turkey portfolio, Planters brand, and foodservice growth. They project adjusted diluted earnings per share to range from $1.58 to $1.68, reflecting investments and their Transform and Modernize initiative. Despite a changing macro environment, the company's consistent strategy and diversified portfolio are expected to maintain growth. Additionally, the company announced leadership changes, with Dr. Kevin Myers leading supply chain efforts due to his extensive experience within the company.

The paragraph outlines leadership transitions at Hormel Foods. Kevin, with a strong background in food technology and R&D, is leading efforts to transform the supply chain and drive operational excellence. Scott Aakre, retiring after a 35-year career, will join the Hormel Foods Board of Directors, bringing his significant marketing expertise. His influence has shaped the company, and Jeff Baker, a seasoned Hormel veteran, will take over retail marketing in fiscal 2026. Jeff's strategic insight and commitment to an inclusive, high-performing culture position him to lead the brand's growth effectively.

The company reported solid financial performance for the second quarter, with net sales reaching $2.9 billion, marking a 1% organic increase from the previous year. The Retail division, particularly the Planters brand, and the Foodservice and international businesses contributed significantly to this growth. Despite higher commodity costs, the gross profit margin was 16.7%. Expenses decreased due to lower legal and advertising costs, while interest and investment income declined because of reduced cash balances. The company reported diluted earnings per share of $0.33, with adjusted earnings per share at $0.35. Operating cash flow was $56 million, impacted by a strategic decision to increase inventory for upcoming demand.

The paragraph outlines the company's recent capital expenditures and future investment plans, highlighting a significant focus on increasing production capacity, infrastructure, and technology. It mentions maintaining a long-standing dividend growth streak and managing debt levels efficiently. Key strategic initiatives include closing a dry sausage facility in California to improve production efficiency, opening a new distribution center in Memphis for better customer service, and advancing operational excellence through the Hormel production system to standardize operations across facilities, which signifies a cultural shift aimed at ensuring sustainable growth.

The company reports strong performance in the second quarter, aligning with its commitment to predictable growth. Looking ahead, it anticipates growth across all segments in the second half, with specific expectations for Retail, Foodservice, and International segments. Incremental benefits from the Transform and Modernize initiative are expected to be between $100 million and $150 million. Turkey remains a significant part of the portfolio, with strategies in place to manage supply challenges. Despite anticipated higher costs in commodities like pork and beef, the company plans to offset these through pricing actions and initiatives. The financial impact of interest and investment income challenges from the first half is acknowledged but not expected to be recovered.

In the paragraph, the speaker discusses the company's financial outlook, highlighting a $0.02 impact on earnings per share due to deferred compensation and estimating a $0.01 to $0.02 impact from tariffs in the latter half of the year. Consequently, they are narrowing their full-year organic net sales growth outlook to 2%-3% and adjusting diluted net earnings per share expectations to $1.58 to $1.68. Despite these challenges, they express confidence in achieving bottom-line growth and emphasize their commitment to strategic initiatives like the Transform and Modernize program. The paragraph concludes with an operator inviting questions, and Peter Galbo from Bank of America asking Jim Snee about the operating income outlook, particularly how the company plans to achieve approximately $700 million in operating income, up from $575 million last year, in light of increased advertising costs and potential benefits from closing a dry sausage facility.

The paragraph discusses the company's optimistic outlook for the second half of the year. It highlights the positive momentum in various areas, such as the recovery of the Planters brand, the strong performance of value-added Turkey products, and success in retail and foodservice sectors. The company also anticipates favorable year-over-year comparisons and steady growth internationally. They are confident that their strategic projects and initiatives will yield strong results, as expected at the beginning of the year. John Ghingo adds that there is excitement and confidence in navigating retail challenges despite the choppy environment and strained consumers.

The paragraph discusses the company's confidence in the relevance and support of its flagship and growing brands, particularly those in its protein-centric portfolio. The company highlights the value these brands offer consumers through convenience, flavor, and emotional and functional benefits. They are planning significant advertising investments, particularly for the Planters brand, and overall increased advertising spending for other brands like Applegate, SPAM, Hormel Pepperoni, and SKIPPY. This spending is expected to boost growth in the back half of the fiscal year. The narrative then shifts to an impending discussion on Turkey, with Jim Snee indicating that Jacinth will initially address the topic of product release timing, and he will later elaborate on changes in the Turkey market.

In the paragraph, Jacinth Smiley discusses the company's expectations for the second half of the year, indicating strong top-line growth in Q3 with a low double-digit EPS growth. The retail segment is anticipated to see low single-digit growth, foodservice mid-single-digit, and the international business high single-digit growth. Jim Snee adds that the company is well-positioned in the Turkey market despite a tightening supply and competitive landscape. They focus on value-added segments like lean ground Turkey in retail, which is a top brand with strong supply support. There are challenges, but the company is skilled at navigating them. Turkey markets are doing better than initially expected, with anticipated gains around Thanksgiving. Overall, the Turkey complex is strong and well-positioned for the rest of the year. The paragraph ends with the operator announcing the next question from Michael Lavery.

In the paragraph, Jacinth Smiley addresses Michael Lavery's inquiry about the expected improvement in second-half margins for the company. She explains that the anticipated margin expansion will be primarily driven by business performance from Turkey, Planters, and the T&M segment. Despite weak first-half margins, they have already seen sequential improvements by the end of Q2, which they expect to continue. Factors contributing to this growth include pricing strategies for Turkey and Planters' strong performance. Additionally, the company is managing the impact of elevated commodity markets through pass-through pricing and thoughtful adjustments. Overall, Smiley expresses confidence in achieving margin expansion in the second half and continued long-term growth for the portfolio.

In the paragraph, Jim Snee discusses the company's strong performance and growth expectations in the Foodservice sector, despite industry challenges like tough consumer traffic and spending. He attributes this success to outperformance in the industry, strong top-line momentum, innovation, and a robust pipeline showcased at the National Restaurant Show. Key factors for expected growth in the year's second half include improvements in the Planters and C-store businesses, favorable year-over-year comparisons, diverse channel presence, and a solution-based portfolio, all of which position the company for continued success.

The paragraph discusses the company's progress and strategies for meeting its annual goals. Jacinth Smiley mentions that they are on track to meet their expectations and highlights various initiatives under the T&M program, such as opening a facility in Memphis and closing a dry sausage facility in California, to enhance logistical efficiency and portfolio management. The company is also focusing on end-to-end planning to improve inventory management, aiming for operational efficiency and a strong margin structure.

The paragraph discusses a company's strategic approach to managing its production and inventory. They are investing significantly in improving production planning and supply chain efficiency, supported by robust data and analytics infrastructure. Their agile management allows them to quickly pivot to other projects if savings opportunities don't meet expectations. Tom Palmer inquires about inventory built for summer demand, referencing past challenges with excess inventory. Jacinth Smiley explains that they've strategically built inventory for summer, particularly for products like Planters and upcoming promotions with SPAM, as part of their investment in the Transform and Modernize program.

The paragraph discusses the impact of elevated commodity markets on inventory balances and effective inventory management to align with business needs. Ben Theurer from Barclays asks about the progress of the Planters brand, specifically in regaining shelf space and distribution lost due to a facility outage. Jim Snee expresses optimism about Planters’ recovery, noting positive trends, before John Ghingo emphasizes excitement about the brand's growth potential and the correction of supply issues.

The paragraph discusses the positive outlook and anticipated growth for the Planters brand. It highlights improvements in the marketplace and better-than-expected second-quarter results. The company expects continued growth in distribution and consumption, with significant improvements in the latter part of the year as they recover from previous distribution losses. The company's strategy includes increased advertising, strong in-store promotions, and innovative products like flavored cashews and nut duos, which attract younger consumers. Planters is well-positioned in the snacking category, and the company is optimistic about its ability to drive growth in the coming quarters.

The paragraph discusses the uncertainty in predicting investment income due to unpredictable market conditions, with Jacinth Smiley explaining that they do not plan for investment income and instead deal with actual outcomes as they occur. Ben Theurer agrees to consider it as zero. Then, Heather Jones inquires about the impact of facility closures by competitors on ground turkey supply and potential market share gains. Jim Snee acknowledges the supply tightening in the competitive landscape but notes that the full effects are yet to be determined as some major facilities have not yet shut down. He emphasizes the company's efforts to drive demand and capitalize on opportunities, with John Ghingo and his team actively working in this area.

The paragraph discusses the consumer appeal and market performance of ground turkey, particularly from the brand Jennie-O, which has become popular due to its versatility and alignment with consumer dietary preferences for lean protein. Jennie-O has seen consistent growth in household penetration and a 4% increase in dollar consumption over the past year. Heather Jones then questions the decline in retail volumes from Q2 compared to previous years, attributing it partially to contract manufacturing and mentions Jennie-O's impact. John Ghingo responds by acknowledging the contraction in retail volumes during Q2 and suggests discussing broader retail trends and prospects for stabilization and growth.

The paragraph discusses a company's volume decline, which was largely due to reduced commodity shipments and contract manufacturing. Despite the decline in contract manufacturing volume, the business achieved net sales growth in the quarter due to favorable mix. Another factor affecting volume was the timing of promotions in the club channel. Although retail volume was different year-over-year, resulting in flat net sales, profitability increased. The company is optimistic about increasing consumer demand for its key brands in the second half of the year, supported by strong consumption momentum and strategic management of commodity-related aspects. The response to a question from Rupesh Parikh of Oppenheimer confirms the company's confidence in achieving over $250 million in operating income growth by fiscal year 2026, with a focus on 2025. Jim Snee reiterates their commitment to reaching these targets, highlighting ongoing organizational efforts.

In the article paragraph, the company maintains a positive outlook, emphasizing benefits from T&M initiatives that enhance financial and long-term capabilities. In response to a query about consumer behavior in the Foodservice and Retail sectors, there's mention of strained consumer sentiment due to inflation and macroeconomic uncertainty. Consumers are trading down to lower-priced options, but the company's diverse portfolio, including value-oriented products, allows it to cater to various pricing preferences. Despite challenges, there is strong growth in premium segments, particularly with the Applegate brand, due to its quality, brand attachment, and innovative offerings.

The paragraph discusses strong growth in the company's Mexican portfolio and highlights the success of the Herdez and Wholly brands in delivering authentic Mexican food experiences. The company is expanding the Herdez brand into the refrigerated entrees category, emphasizing flavor and convenience. It also notes strong demand for Jennie-O ground turkey, as consumers seek lean protein options. Despite some consumer trading down, there is a focus on value, particularly in protein offerings. Jim Snee points out that the company is maintaining market share in the retail sector and sees opportunities on the Foodservice side, despite pressures on dining away from home. The company believes its strategies well-position them to navigate macroeconomic challenges.

In the discussion, Jim Snee addresses expectations for Foodservice margins, expressing confidence in strong top-line growth driven by opportunities with Planters and innovation, which should lead to segment profit growth in the latter half of the year, aided by favorable year-over-year comparisons. Regarding the international segment, Snee explains that previous shifts in export customer mix were temporary and primarily related to timing issues. He emphasizes steady, strong growth for the international business, particularly highlighting strong performance in China as a key contributor for the rest of the year.

Jim Snee concluded the call by expressing satisfaction with the company's solid top-line performance and results that met expectations for the second quarter. He emphasized confidence in achieving a strong second half, attributing it to the company's structure, strategies, and portfolio. He thanked the participants and wished them a good day before the operator closed the call.

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