Stock up 9.0%
Hormel Foods (HRL) has delivered year-to-date stock gains of ~9.0% as of September 19, 2018. In comparison, peers Tyson Foods (TSN), Sanderson Farms (SAFM), and Pilgrim’s Pride (PPC) have fallen 24.1%, 27.5%, and 40.2%, respectively.
Hormel Foods like other industry players has been suffering from cost inflation and rising logistics costs. The company witnessed increases in freight costs for all the three reported quarters of fiscal 2018.
Freight costs are expected to remain a headwind for Hormel Foods for the remainder of fiscal 2018 and also in fiscal 2019. Moreover, the turkey market oversupply remains a concern along with the higher tariffs on pork imports. China is one the largest markets for US pork exports.
Given the near-term headwinds, management has lowered the top-line outlook for 2018. For fiscal 2018, sales are now expected to be in the band of $9.40 billion to $9.60 billion versus the earlier guided range of $9.70 billion to $10.10 billion.
Goals for 2020
To combat these industry-wide challenges, Hormel mapped out a strategic roadmap to the future during its 2017 Investors Day. The company reiterated its 2020 goals at the recently held Barclays Global Consumer Staples Conference.
The company expects to drive growth by expanding and accelerating foodservice and evolving into a broader food company. It’s aiming to reduce volatility, sell non-strategic assets, and streamline and upgrade the supply chain.
Hormel Foods targets 5% and 10% growth in sales, and EPS (earnings per share), respectively, by 2020. It is also working on driving sales from the innovative products that were launched in the past five years to 15% of total sales by 2020. The company is focused on product innovation to keep up with changing consumer preferences. Consumers are now more inclined toward healthier and on-the-go options.