Skippy Acquisition Continues to Benefit Hormel's Profit

Hormel Foods Corp. said its fiscal first-quarter earnings rose 18% as the packaged-foods company benefited from its recent purchase of Skippy as well as strong demand for its bacon products.

Chief Executive Jeffrey M. Ettinger said Thursday the company's refrigerated foods segment "has momentum heading into the second quarter as macro conditions remain favorable."

But, he added, unusually cold weather and higher fuel costs will continue to push up prices for goods in its Jennie-O Turkey Store segment in the second and third quarters. The company backed its full-year earnings guidance.

Hormel, whose brands include Spam and Dinty Moore, has posted improving revenue for more than three years as consumers choose to eat at home more often. Rising commodity costs and customers' resistance to higher prices, however, have pressured margins.

Hormel bought the Skippy peanut-butter business from Unilever for about $700 million last year, a move that has expanded its offerings as well as its presence in China.

For the quarter ended Jan. 26, Hormel reported a profit of $153.3 million, or 57 cents a share, up from $129.7 million, or 48 cents a share, a year earlier. Sales rose 6% to $2.24 billion while volume grew 2%.

Analysts polled by Thomson Reuters predicted earnings of 58 cents a share on $2.25 billion in revenue.

At the refrigerated-foods business, its largest revenue contributor, sales rose 6.1%, while operating profit rose 59%, helped by higher pork operating margins and strong demand for the company's bacon products.

Grocery-products sales rose 20%, but declined 2% when excluding Skippy. Profit rose 13%.

Write to Ben Fox Rubin at [e-mail]

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