DOW JONES NEWSWIRES 
 

Hormel Foods Corp.'s (HRL) fiscal first-quarter net income slipped 7.7% amid continued pressure from higher feed and fuel costs and falling volume.

The meat industry, like many others, is reeling from declining demand and oversupply, forcing producers, processors and supermarkets to cut production and prices.

For the quarter ended Jan. 25, the maker of Spam and Dinty Moore stews posted net income of $81.4 million, or 60 cents a share, down from $88.2 million, or 64 cents a share, a year earlier.

Revenue climbed 4% to $1.69 billion as the recession has had a "mixed effect" on sales, boosting demand for retail products while areas such as new convenience items have weakened. Volume dropped 1%.

Analysts expected per-share earnings of 51 cents on revenue of $1.73 billion.

Gross margin decreased to 16.1% from 18.1% on feed and fuel costs.

Despite higher costs, analysts say production cuts will help keep meat prices down. Unlike other commodity sectors were supply levels are relatively easy to manage, animal life cycles prevent livestock producers from reacting quickly to changes in the market. Thus, to reflect lower global demand, meat producers and processors must cut the amount of food they produce and lower prices to rid themselves of the oversupply.

Jennie-O Turkey continued battling ample supplies and higher feed and energy expenses, as profits dropped 16%. Chief Executive Jeffrey Ettinger said strong canned meat and retail products sales helped offset Jennie-O weakness.

Shares of Hormel, which affirmed its downbeat fiscal-year earnings forecast, closed Wednesday at $30.42 and there was no premarket trading. The stock is down nearly 20% the past four months, much less than the market average.

-By Katherine E. Wegert, Dow Jones Newswires; 201-938-5400; katherine.wegert@dowjones.com