Hormel’s Turkey Boom is About to Bust
Packaged foods firm forecasts sales plunge due to bird flu.
June 2, 2022
In the latest quarter Hormel (HRL), a meat, nut, & food products manufacturer, reported what it called an excellent quarter for its Jennie-O Turkey Store segment with sales up 16% and profit up nearly 400%. The Jennie-O Turkey Store segment consists primarily of the processing, marketing, and sale of branded and unbranded turkey products for retail, foodservice, and commercial customers.

This turkey boom, however, will not extend into next quarter.

On the latest earnings call, Hormel cited multiple reasons, including the highly pathogenic avian influenza (HPAI):

“Given the uncertainty regarding HPAI and based on our current expectations, Jennie-O Turkey Store sales volumes are projected to decline approximately 30 percent in the back half of the year due to supply gaps in its vertically integrated supply chain.”

Though bird flu is expected to have a “meaningful impact” on turkey supply, Hormel credits the
bio-security measures implemented since a 2015 outbreak with cutting the number of company-managed turkeys impacted to date by 25%. The Jennie-O Turkey segment is also in the midst of an overhaul, with supply chain consolidation eventually expected to save $20-$30 million annually.

This as well as breast meat prices topping more than $6 per pound—an all-time high— resulted in management forecasting flat third quarter earnings with the year prior. Simply reaffirming guidance after such a strong quarter sent shares down approximately 6% intra-day.

Turkey producers are seemingly in for a difficult second half.

It’ll likely be even worse for those paying for Thanksgiving dinner.
Related: CAG, TSN, SAFM, PPC
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