With Thanksgiving turkey in sight, Hormel Foods Corp. reported lackluster financial results Tuesday on weakness in its food service business due to shuttered restaurants and cafeterias.
The Austin, Minn.-based food company, like the rest of the meat industry, continued grappling with the fallout from COVID-19 that has increased production costs and remained a constant threat to its workforce in its fourth quarter.
The protein-centric company missed earnings expectations and delivered an unforeseen revenue decline for the quarter ended Oct. 25.
Profit fell in the quarter to $234.4 million, or 43 cents per share, missing the consensus among 11 analysts polled by Refinitiv, formerly Thomson Reuters, by a penny. Revenue also declined 3% to $2.4 billion.
“Consistent with industry trends, our food service business showed declines this past quarter. As a leader in the industry, we will continue to support the distributor and operator community during this difficult time,” said Jim Snee, Hormel’s chief executive, in the earnings release.
Hormel, like other major food manufacturers, has witnessed dramatic declines in its sales to restaurants, schools and institutions that have been closed or severely restricted during the pandemic. For the quarter, food service revenue dropped 23% while U.S. retail rose 7%.
“This most recent surge of COVID-19 cases in communities does create a level of uncertainty in a number of areas, notably labor availability, customer demand and raw material markets,” Snee said.
While Thanksgiving is just two days away and turkey on everyone’s mind, this reported quarter doesn’t capture what is expected to be unusual and unpredictable Thanksgiving season for the second-largest turkey company in America.
The maker of Spam, Wholly Guacomole and Skippy peanut butter also reported record annual revenue for the 2020 fiscal year of $9.6 billion, a rise of 1%.
“I’m proud of how our team overcame multiple challenges to deliver record sales this year,” Snee said. “In several of our domestic businesses, strong demand for our products exceeded the available supply. From a bottom-line perspective, our experienced leadership team managed through the incremental supply chain costs we incurred related to the pandemic, which was the largest driver of our earnings decline,”
Hormel also announced a dividend increase of 5% increase Tuesday, bringing it to 98 cents per share.
The company’s stock fell 3.6% in premarket trading.