No drop in Jennie-O profit for first time in two years

For the first time in two years, Hormel Foods saw its Jennie-O Turkey Store segment’s profits increase when measured on a year-over-year basis.

Roy Graber Headshot
(Courtesy Hormel Foods)
(Courtesy Hormel Foods)

For the first time in two years, Hormel Foods saw its Jennie-O Turkey Store segment’s profits increase when measured on a year-over-year basis.

The segment’s profit for the first quarter of the 2019 fiscal year was $37.9 million, up a half percent when compared to the first quarter of fiscal year 2018. That result was a big contrast from the previous eight quarters, each of which saw profits drop by double-digit percentages.  

However, Hormel Foods President, Chairman and CEO James Snee said “the quarter was actually shaping up to be a good quarter for us,” indicating the segment likely would have been profitable had it not been for the December recall of lean ground turkey products suspected to have been contaminated with Salmonella Reading.

“This resulted in a 10 percent decline and scanned retail sales volume of lean ground turkey during the quarter,” Snee said during the quarterly earnings call on February 21.

The first quarter ended on January 27.

The company reported improved results in foodservice and commodity sales for Jennie-O Turkey Store, which were offset by declines in retail. Volume and sales increases in foodservice were driven by many categories, including Jennie-O raw boneless breasts and Jennie-O  cooked breasts. Segment profit was reported as flat as lower selling, general and administrative expenses were offset by lower retail sales of lean ground turkey.

The last time a profit increase for Jennie-O Turkey Store was reported was during the fourth quarter of fiscal year 2016, when profits went up by 26 percent.

Looking forward

Snee said that although Jennie-O experienced the rebound in sales after the recalls, and the company has confidence in the long-term growth of lean ground turkey, it is still being very conservative on the segment’s sales outlook.

“We will continue to focus on improving our turkey supply chain and investing in the Jennie-O brand. But because of these recent events, we expect Jennie-O Turkey store to fall below the plan we had for them this year,” he said.

Other financial results

Not all products sold under the Jennie-O label are part of Hormel’s Jennie-O Turkey Store segment. The company moved its Jennie-O deli turkey products to its Refrigerated Foods segment, and that segment’s profits rose 3 percent to $162.6 million, while its net sales increased 2 percent and volume dropped 1 percent.

Hormel Foods as a whole reported net earnings of $241.42 million.

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