Hormel Falls Flat in Q1, Sending a Chill Through the Market, but Shares Still Not Appetizing

There wasn’t a ton to like in Hormel’s first-quarter print. Sales fell 2% on a nearly 12% drop in volumes, gross margin contracted 100 basis points to 16.7%, and operating margin shrank 80 basis points to 9.7%. A portion of the underperformance can be attributed to the usual suspects—supply chain disruptions, unrelenting cost pressures, and the lagging impact on turkey supply from the avian flu. However, we were more troubled by the business failing to pivot to market dynamics, resulting in production across its categories eclipsing demand; Planter’s (a brand that had been a bright spot in its mix) was qualitatively referenced as particularly weak.