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Hormel Foods Corp. said Thursday its fiscal
third-quarter profit fell 9 percent as higher meat, fuel and other
costs outweighed price increases and hurt margins.


      For the three months ended July 27, the Austin, Minn.-based
maker of Spam and Jennie-O Turkey said it earned $51.9 million, or
38 cents per share. That compares with a year-ago profit of $57.4
million, or 41 cents per share.


      Revenue rose 10 percent to $1.68 billion, up from $1.52 billion
during the same period last year.


      The earnings fell just short of analyst expectations. Thomson
Reuters said analysts expected earnings, excluding one-time items,
of 39 cents per share on revenue of $1.62 billion.


      Shares of Hormel fell 50 cents, or 1.4 percent, to $34.64 in
morning trading.


      The quarter, as the company had previously announced, was hurt
by higher feed and fuel costs at its Jennie-O Turkey Store segment,
Chief Executive Jeffrey M. Ettinger said in a conference call. The
segment posted an 11 percent increase in sales, to $310.5 million,
but its operating profit fell 61 percent on higher fuel and feed
costs.


      Hormel said it raised prices in the quarter -- though it didn't
say by how much. But the increases weren't enough to offset the $53
million jump in fuel and feed costs the segment saw.


      Price increases were also hurt by an oversupply of turkey breast
meat, which keeps prices down. Hormel has announced a 5 percent
production cut, and others in the industry are doing the same, in
an attempt to push prices back up.


      Ettinger said the benefits of these cuts, along with lower grain
costs, may not be felt until the spring of next year.


      "As long as the commodity side of the business is not being
detrimental to our results we're satisfied with that," Ettinger
said. "That was obviously not the picture in this quarter and it
won't be next quarter either."


      The company's biggest segment - refrigerated foods - saw sales
up 8 percent to $890.1 million on strong demand for its value
products, include its Di Lusso Deli products and Hormel pepperoni.


      But net sales were down in the foodservice division, which sells
food to restaurants. Other food makers are reporting similar
declines as more people abandon pricier restaurants to eat meals at
home to save money.


      The grocery division, which includes Spam, Dinty Moore stews and
Hormel and Stagg chili, saw a 10 percent rise in sales to $222.9
million.


      Sales of Spam -- the pork-in-a-can product -- helped drive growth
in the company's segment that includes international business.
Sales in that segment were up 33 percent to $61.7 million as Spam
saw increases in most markets.


      The company maintained its previously announced full-year
guidance. It had lowered that to $2.22 to $2.28 a share earlier in
the month, citing higher-than-expected input costs. Analysts are
expecting earnings per share of $2.25, according to Thomson
Reuters.
      

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SPAM sparks surge at Hormel

Business and Economic News

Hormel said it raised prices in the quarter, but the increases weren't enough to offset a $53
million jump in fuel and feed costs.

Hormel 3Q profit falls 9 percent on higher costs

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