Hormel Foods 4Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Jennie-O turkey doing quite well

“Jennie-O Turkey Store continues to build momentum delivering increased segment profit of 45% on a sales increase of 11% during the quarter. For the full year, operating profit was up 23% and sales increased 4%. Results at Jennie-O Turkey Store in the quarter were driven by continued growth in value-added sales, along with high commodity turkey prices. JENNIE-O lean ground turkey and JENNIE-O turkey bacon led sales growth this quarter.

We increased our Jennie-O Turkey Store advertising spend this year with a Make The Switch campaign that started early in fiscal 2014, featuring ground turkey tacos. We plan to continue this advertising campaign in new U.S. markets early in fiscal 2015. We expect Jennie-O Turkey Store segment operating profit margin to be within the 13% to 17% range going forward.”

Expect Jennie-O to have another good year next year, but there are some headwinds

“Clearly Jennie-O Turkey Store, our expectation is to have another good year. They are in a more favorable grain environment, plus they have great value-added momentum, and this should move them towards the top of the operating profit range that we just articulated. That being said, there are some mitigating factors for Jennie-O Turkey Store. The grain benefit is partially offset by hedges. We’ve talked before about our hedge philosophy. The soymeal side of the grain formulas has remained stubbornly high. And we do have certain grain based contracts with foodservice customers within that segment.

Secondly, we expect the turkey commodity meat markets, which have been at an all-time high, to not be quite as favorable in 2015. And then third, we have approved an enhanced advertising budget for Jennie-O Turkey Store, the Make The Switch campaign has driven good results, and so we’re going to be investing further there. In fact, overall advertising spending, as we talked about, was up double digits in 2014 for the whole Company and should be again in 2015.’