High feed costs hurt Jennie-O Turkey Store performance

Jennie-O Turkey Store saw its profits decrease 54% for the second quarter of fiscal year 2021, largely due to high feed costs.

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Courtesy Hormel Foods
Courtesy Hormel Foods

Jennie-O Turkey Store saw its profits decrease 54% for the second quarter of fiscal year 2021, largely due to high feed costs.

The segment profit for the quarter was $12.7 million, down from year-ago levels of $27.3 million.

Volume was down 3%, but the net sales were up 2% for the quarter when compared to the second quarter of fiscal year 2020. Executives for Hormel Foods, Jennie-O Turkey Store’s parent company, said sales rose due to a recovery in the foodservice sector, as well as higher whole bird shipments. And while retail sales declined, they did remain elevated when compared to the levels they were at before the COVID-19 pandemic

“Demand for Jennie-O retail products such as lean ground turkey remained above pre-pandemic levels. Jennie-O Turkey Store segment profit declined 54% due to the impact from higher feed costs. Grain prices continue to increase significantly during the quarter, while pricing action had yet to be fully reflected in the marketplace,” Jim Snee, Hormel Foods president, chairman and CEO said during an earnings call on May 20.

Speaking during that same call, Hormel Chief Financial Officer Jim Sheehan said: “In response to global supply and demand imbalances in corn and soybean meal we have taken strategic hedges to fully cover grain costs for the remainder of the year. The positions also provide a benefit if markets decline. These hedges coupled with the previously announced pricing actions are expected to protect Jennie-O's profitability.”

While the Jennie-O segment saw a decline in profits, Hormel Foods as an entire company did see a slight increase in net earnings for the second quarter. During the most recent quarter, Hormel’s net earnings were $227.9 million, compared to year-ago levels of $227.7 million. 

"Once again, our balanced business model has proven to be a winning formula as our team delivered record sales in the first half and is on pace to deliver a second consecutive year of record sales," said Snee. "We were able to achieve these record results through strong foodservice sales, continued elevated demand in the retail, deli and international channels, and improved supply chain performance."

"We anticipated rapid demand changes in our foodservice business, and our team delivered, with sales exceeding 2019 pre-pandemic levels. The investments we have made over the years to build a world-class foodservice business, including an experienced direct sales force and portfolio of products that solve for customer challenges, give us a competitive advantage as the industry recovery accelerates."

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