Jennie-O Turkey Store’s profit was down 34 percent in the second quarter of fiscal year 2018, but the financial picture for the Hormel Foods subsidiary is expected to improve in fiscal year 2019.
Hormel Foods released the company’s financial results for the second quarter on May 24, in which the Jennie-O Turkey Store segment profit dropped year-over-year from $108.3 million to $95.7 million.
Meanwhile, Jennie-O Turkey Store’s net sales dropped 4 percent and its volume dropped 3 percent.
According to Jim Snee, CEO of Hormel Foods, sales declines were primarily a result of lower whole bird pricing and volume amid the continued oversupply of turkeys in the industry and excess meat in cold storage. The segment profit decrease was largely a result of lower profits from whole bird and commodity sales, added freight costs and increased advertising costs.
The losses, however, were partially offset by stronger sales of ground turkey and other value-added products, Snee noted.
Outlook for future quarters
Snee, speaking during a conference call with investors, said he still expects earnings to decline in the second half of the fiscal year. But the company expects a turnaround in fiscal year 2019.
“Signs of supply reduction are encouraging and we see Jennie-O Turkey Store returning to growth in the first half of fiscal 2019,” said Snee.
Among those encouraging signs are reductions in poult placements, decreased industry harvest levels and less turkey breast in cold storage when compared to this time in 2017.
Turkey trends in recent past
While the industry is looking at a potential turkey supply and processing reduction, that was not necessarily the case at the end of 2017.
According to the WATT PoultryUSA 2018 Top Turkey Companies survey, only three of the top 22 companies reduced their total live pounds processed in 2017 when compared to 2016. Jennie-O Turkey Store, the second largest turkey processor in the United States, was one of those companies with a 4.71 percent reduction. Butterball, the largest turkey company in the U.S., reduced its pounds processed by 1.81 percent, while Prestage Farms, the 17th largest turkey company, saw a 4.76 percent reduction.
All other companies either increased its pounds processed or kept them consistent with 2016 numbers. Kraft Heinz, the fifth largest turkey company in the U.S., increased its volume by the largest percentage with a gain of 36.7 percent.
