Low turkey prices hurt Jennie-O profits
WILLMAR — The first-quarter operating profit for Jennie-O Turkey Store was down 25 percent even though the volume was up 22 percent and sales increased by 13 percent compared to the same time last year.
The information was included in the first-quarter financial reports by Hormel Foods Corporation.
"Earnings at Jennie-O Turkey Store declined compared to last year as turkey commodity prices were lower than we expected, " said Jim Snee, president and chief executive officer, in a news release.
"However, demand for Jennie-O branded products continues to be strong," Snee said.
Despite volume and sales increases of value-added products, segment profit declined primarily due to lower turkey commodity prices and increased operating expenses, according to a news release from Hormel.
Pricing pressure from competing proteins in the food service, deli and retail channels also affected the quarterly results.
"We are tempering our full-year outlook for the Jennie-O Turkey Store segment given the shortfalls in the first quarter and the expected continuation of pricing pressure due to low commodity turkey prices," Snee said.
Improvements in our other segments are expected to offset some of the earnings headwinds from Jennie-O Turkey Store," he said.
Overall, Hormel reported increases in adjusted sales and volume performance and flat net earnings of $235 million.
"I'm proud of our team's ability to drive earnings growth for the 15th consecutive quarter," Snee said. "Our adjusted sales and volume performance for the quarter was solid with sales up 3 percent and volume up 5 percent."
Hormel also reported diluted earnings per share of 44 cents, which is up 2 percent from the 2016 earnings per share of 43 cents.
According to the report, the financial standings reflect the company's divestiture of the Diamond Crystal Brands and Farmer John businesses and the acquisition of Justin's LLC.
Hormel said it is lowering its fiscal 2017 guidance to $1.65 to $1.71 per share due to challenging market conditions in the turkey industry.
"The balanced model we have intentionally built in our business will allow us to overcome the challenges at Jennie-O Turkey Store," Snee said. "I remain confident in our team's ability to deliver sales and earnings growth by supporting our brands, innovating, and making strategic investments."