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SEC filingQ1 FY26 EPS rose 6% YoY to $0.33, driven by Foodservice and International growth offsetting Retail declines.
For the first quarter of fiscal 2026 (ended January 25, 2026), Hormel Foods reported net sales of $3.03 billion, a 1.3% increase from $2.99 billion in the prior-year quarter. Organic net sales rose 1.6%, driven by growth in the Foodservice and International segments, partially offset by a decline in Retail. Total volume decreased 3.9% to 1.01 billion pounds, with organic volume down 3.8%, primarily due to the strategic exit from select non-core private label snack nut items.
Gross profit fell 1.2% to $469.6 million, and gross margin contracted 40 basis points to 15.5%, as improvement in Foodservice was more than offset by declines in Retail and International. Cost of products sold increased 1.8% to $2.56 billion, driven by higher logistics expenses and commodity input costs (beef, pork trim, nuts).
SG&A expenses decreased 8.1% to $241.7 million (8.0% of net sales), benefiting from a $23.5 million gain on the sale of Justin's, LLC and lapping a prior-year loss on a sow operation sale, partially offset by $27.2 million in non-recurring costs (T&M initiative, corporate restructuring, consulting agreement). Adjusted SG&A was flat at $238.4 million (7.9% of net sales).
Net earnings attributable to Hormel Foods rose 6.6% to $181.8 million, and diluted EPS increased 6.5% to $0.33. Adjusted diluted EPS declined 2.9% to $0.34, reflecting the impact of non-recurring charges. The effective tax rate was 22.4%, up from 21.8% in the prior year, due to an increase in stock option expirations.
Retail – Net sales declined 2.2% to $1.85 billion, and organic net sales fell 1.8%. Volume dropped 5.8% (organic -5.7%), significantly impacted by the exit from select non-core private label snack nut items and declines in branded and private label packaged deli items. Segment profit plunged 19.3% to $96.2 million, pressured by lower sales, higher raw material costs, and elevated logistics expenses.
Foodservice – Net sales increased 7.3% to $998.2 million (organic +7.4%), with volume flat. Growth was broad-based, led by customized solutions, premium prepared proteins, and branded pepperoni. Segment profit rose 12.8% to $156.5 million, driven by the benefit of pricing actions aligned with market dynamics.
International – Net sales grew 7.6% to $181.3 million (organic +7.7%), with volume up 1.2%. Growth was driven by multinational businesses and branded exports, led by SPAM® luncheon meat. Segment profit increased 9.9% to $22.9 million, as lower SG&A and growth in China offset lower export margins.
Management expects net sales growth for fiscal 2026, assuming growth across a broad range of categories, increased brand support, and market-based pricing actions. Risks include slowing consumer demand and commodity price fluctuations. The effective tax rate for fiscal 2026 is expected to be between 21.5% and 22.5%. Capital expenditures are estimated at $260 million to $290 million, focused on capacity expansion, data and technology, and equipment upgrades. Advertising expense is expected to increase for the full year versus the prior year. The company remains committed to its dividend, having authorized a $0.2925 per share quarterly dividend (a 1% increase). No share repurchases occurred in the first quarter. The company believes its liquidity sources—including $867.9 million in cash and a $750 million revolving credit facility—are adequate to meet short- and long-term commitments.
Operating cash flow of $349.2 million comfortably exceeded net income of $181.8 million (coverage ratio ~1.9x), indicating strong cash generation relative to earnings. The primary adjustments were depreciation & amortization ($67.1M), a loss on sale of business ($23.5M), and equity method earnings ($15.8M). Working capital provided a net inflow of $110.5 million, driven by decreases in accounts receivable ($90.9M) and inventories ($91.3M), partly offset by a decline in accounts payable/accrued expenses ($97.0M).
Capital expenditures of $69.0 million (20% of CFO) were slightly below the prior-year $72.2 million, consistent with moderate capex intensity. Free cash flow (not explicitly stated) would approximate $280.2 million before dividends. Dividends paid ($159.5M) used 46% of operating cash flow, a meaningful but sustainable payout. There were no share repurchases disclosed.
Investing activities generated net cash of $7.9 million due to $78.9 million in proceeds from business sale, which offset capex and other outflows. Financing cash outflows of $162.4 million largely reflected dividends and modest debt repayments ($1.8M). Overall, the company maintains a strong cash position, ending the period with $867.9 million.