With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

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Industries included in the sector are beverages, food consumer products, and food production.

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The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

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The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

This year’s Fortune 500 marks the 68th running of the list.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-317-Hormel Foods

The company that gave the world Spam is a major processor and distributor of meat and other food products, with its goods sold in more than 80 countries under brand names like Skippy, Applegate, Natural Choice, and Black Label. Hormel managed to produce a 1.2% growth in sales in 2020 and moved up 20 spots in the 500 rankings this year.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-337-Hormel-Foods

The food company based in Austin, Minn., has a portfolio of brands that includes Spam, Skippy, and Dinty Moore.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

This year's Fortune 500 marks the 62nd running of the list.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Hormel Foods, established in 1891, is a global company that produces, processes, and distributes food brands. Its portfolio includes fresh and frozen produce as well as pantry staples. With stores in more than 80 countries, Hormel’s companies include SPAM, Planters snacks, and turkey specialists Jennie-O. Between 2000 and 2013, Hormel rapidly acquired some of its most notable names including peanut butter maker Skippy and organic meat producer Applegate Farms.

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Q4 2024

Hormel Foods (HRL): Company Profile, Stock Price, News, Rankings

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Hormel Foods

hormel foods

Good morning, ladies and gentlemen, and welcome to the Hormel Foods Corporation 4th Quarter Earnings Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Wednesday, December 4, 2024. I would now like to turn the conference over to Jess Blomberg, Director of Investor Relations.

Good morning. Welcome to the Hormel Foods conference call for the Q4 of fiscal 2024. We released results this morning before the market opened. If you did not receive a copy of the release, you can find it on our website, formalfoods.com, under the Investors section. On our call today is Jim Snee, Chairman of the Board, President and Chief Executive Officer Jacint Smiley, Executive Vice President and Chief Financial Officer John Gingo, Executive Vice President of the Retail segment and Nathan Annis, Vice President of Corporate Development.

Jim and Jacinthe will review the company's 2024 Q4 and full year results and provide a perspective on our outlook for fiscal year 2025. Then Jim, Jacinth and Nathan will provide a holistic update on our Transform and Modernize initiative, which was introduced at our 2023 Investor Day. John will join Jim, Jacinth and Nathan for the Q and A portion of the call. The line will be open for questions following Nathan's remarks. As a courtesy to the other analysts, please limit yourself to one question with one follow-up.

If you have additional questions, you are welcome to get back into the queue. At the conclusion of this morning's call, a webcast replay will be posted to our investor website and archived for 1 year. Before we get started this morning, I'd like to reference our safe harbor statements. Some of the comments we make today will be forward looking and actual results may differ materially from those expressed in or implied by the statements we are making. Please refer to our most recent annual report on Form 10 ks and quarterly reports on Form 10 Q, which can be accessed at hormelfoods.com under the Investors section.

Additionally, please note we will be discussing certain non GAAP financial measures this morning. Management believes that doing so provides investors with a better understanding of the company's underlying operating performance. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Further information about our non GAAP financial measures, including our comparability items and reconciliations are detailed in our press release, which can be accessed from our corporate or investor website. I will now turn the call over to Jim Snee.

Thank you, Jess. Good morning, everyone. In fiscal 2024, we demonstrated the solid execution of our strategy, the power of our portfolio and the resilience of our team. In our business segments, we navigated a dynamic macro consumer environment by reinvesting in our brands, expanding market presence and introducing innovative solutions across our portfolio. In doing so, we delivered solid results, coming in line with our adjusted diluted net earnings per share expectations for the year.

We made significant progress in the 1st year of our Transform and Modernize initiative, delivering an impressive $75,000,000 in operating income benefit and setting our company up for growth and long term success. With our disciplined financial approach,

of our value added portfolio and the benefits from Transform and Modernize, we delivered a record year of operating cash flow, enabling us to return a record amount of cash to our shareholders in the form of dividends. In retail, we leverage the strength of our brands by prioritizing resources towards brands and categories where we know we can win. Flagship and rising brands such as Hormel Black Label, Jennie O, SPAM and Applegate delivered strong growth and expanded households across on trend categories. We brought meaningful consumer centric innovation to our brands and fueled their growth through increased advertising investments. We continue to expand our leadership in our foodservice segment, growing net sales by 6%, well above industry growth.

This success highlighted the differentiated value and relevant offerings our dedicated team brings to the industry. The team executed on our strategic priorities by launching solution based innovation for our operators and drove impressive growth in the convenience channel by expanding distribution of entertaining and snacking brands like Columbus and Gatherings. And as expected, we saw the strong recovery of our international segment. We increased branded exports for the SPAM family of products and Skippy peanut butter. We drove growth from investments in the Philippines and Indonesia and achieved a solid recovery of our China business.

We remain well positioned to deliver growth and expand our global presence. In addition to delivering on expectations and driving momentum with our value added portfolio, we accomplished other considerable milestones in fiscal 2024. We drove 140 basis point increase in our estimated net sales from innovation. Successful innovation underscores the importance of understanding consumer and operator needs and delivering effective solutions, especially in this dynamic macro environment. Our brand teams understand that consumers are hungry for new food experiences, both in home and away from home.

Innovation will continue to be foundational to our growth strategy, supported by our exceptional R and D professionals, signature chefs and brand fuel team. And the safety of our employees will always remain a pillar of our culture. I am proud to report that in fiscal 2024, we achieved our safest year in our company's history. This milestone is fundamental to our success and a testament to our team members' focus on our safety first culture. Cash flow has always been a bedrock of our company.

And this year, we broke our all time record for operating cash flow, delivering $1,300,000,000 for the year. The strength of our portfolio, the disciplined operation of our business and the success of our T and M initiative allowed us to deliver this significant achievement. As a result of our record operating cash flow and disciplined capital allocation strategy, we once again returned a record amount of cash to shareholders in the form of dividends. We also recently announced the 59th consecutive increase to our annual dividend, a record we are incredibly proud of. There are a number of reasons to be excited about the position we are in today because in fiscal 'twenty four, we overcame significant headwinds to deliver our earnings guidance.

We leveraged the strength of our value added portfolio across our retail, foodservice and international segment. And we delivered $75,000,000 of operating income benefits through our transform and modernize initiative. As we head into 2025, our brands continue to have either number 1 or number 2 share positions in over 40 retail categories. We are making strategic investments into flagship and rising brands like Hormel Black Label Bacon, Planters, SPAM, Applegate and Jennie O. Our foodservice segment continues to provide unique value in the marketplace and our international segment is well positioned to deliver growth and expand our global presence.

Transform and Modernize is on track, delivering value and helping to return the company to its historical earnings trajectory. There is a growth mindset embedded in our culture, allowing us to be more competitive, agile and capital efficient. We are fueling investments back into the business to drive growth and deliver shareholder returns. The momentum in our underlying business coupled with the strength of our most transformative initiative ever gives me great confidence in our team, brands and company. I will now transition the call to Jussan for her remarks.

Thank you, Jim. And to everyone joining us today, I would like to echo Jim's comments around the confidence in our business, the power of our portfolio and the strength of our global team and culture. Volume for the Q4 was £1,100,000,000 and net sales were $3,100,000,000 For the full year, volume was £4,300,000,000 and net sales were $11,900,000,000 Gross margin in the 4th quarter and full year increased 50 basis points to 16.6% 17%, respectively. This reflects the strength of our value added portfolio and the early successes of our Transform and Monodize initiative. Full year SG and A expenses increased compared to last year, primarily due to employee related expenses and the TNM initiative.

We expect SG and A expenses to increase in fiscal 2025. Advertising investments for fiscal 2024 were $163,000,000 up 2% compared to last year. We have planned for double digit percentage increases in advertising investments in fiscal 2025. For fiscal 2024, interest and investment income increased due to favorable Rabbi Trust performance and higher interest rate. Interest expense increased due to higher rates on debt issued during the year.

Our fiscal 2025 expectations assume lower interest and investment income and comparable interest expense. Operating income for fiscal 2024 was $1,100,000,000 Operating margin was 9% and adjusted operating margin was 9.6%. The tax rate for fiscal 2024 was 22.3% and the effective tax rate for fiscal 2025 is expected to be in the range of 22% to 23%. For the full year, diluted net earnings per share was $1.47 and adjusted diluted net earnings per share was $1.58 Turning now to the balance sheet. We remain committed to dividend growth, investing in our business and maintaining our investment grade rating.

Our record cash flows from operations of $1,300,000,000 in fiscal 2024 and disciplined financial strategy directly support these commitments. In fiscal 2024, we returned a record $615,000,000 to our shareholders in the form of dividends, including payment of our 385th consecutive quarterly dividend. We also recently announced an increase of our annual dividend of 3% to $1.16 per share for fiscal 2025. This will represent a remarkable 59th consecutive year of value added growth. We are targeting between $275,000,000 $300,000,000 in capital projects for fiscal 2025.

We ended the year with $2,900,000,000 of debt and over $765,000,000 in cash and short term securities. We remain comfortably within our stated goal of 1.5x to 2x net debt to EBITDA. Inventories finished the year at $1,600,000,000 a decrease of $104,000,000 from the beginning of the year. We enter fiscal 2025 with responsible levels of inventory to service our customers and ample production capacity to grow our business. Finally, I would like to provide additional color on a few items from fiscal 2024.

First, as we noted during our Q3 earnings call, we experienced storm damage to our Papillion, Nebraska facility in early Q4. This event resulted in approximately $9,000,000 of negative impact to the Q4. 2nd, we made significant progress during the quarter regarding the Suffolk production disruption. We are improving fill rates, regaining distribution, refilling shelves and prioritizing innovation. At the same time, we do expect some near term commercial impacts and higher costs, most notably in the Q1 of fiscal 2025.

We expect to benefit from the recaptured momentum in the Planters brand starting in the Q2 of fiscal 2025. Lastly, in the final week of the fiscal year, we divested of our Hormel Health Labs business, which was reported in our Foodservice segment and contributed £64,000,000 and $108,000,000 of net sales to our top line and approximately $0.01 to adjusted EPS in fiscal 2024, which will not be repeated in future years. Shifting now to our fiscal 2025 outlook. We expect each segment to deliver top line growth as we continue to provide innovative offerings in the marketplace and increase investments in our brands. For full year fiscal 2025, we expect the following in each of our segments: Retail, comparable volume and low single digit increases in net sales Foodservice, after adjusting for Hormel Health Labs divestiture, mid single digit increases in volume and mid single digit increases in net sales And for international, low single digit increases in volume and high single digit increases in net sales.

We also anticipate segment profit growth from each segment for the full year with growth weighted towards the back half of the year. Regarding key input cost assumptions in our fiscal 2025 outlook, we expect port input costs to be comparable to fiscal 2024 and remain above the 5 year average. Beef costs to continue to be a headwind, nut input costs to be a drag year over year, turkey markets to continue to be depressed for the full year with lower year over year whole bird prices specifically in the Q1. Our outlook also accounts for a moderate benefit due to favorable grain prices. I would also like to note that we expect $0.04 to $0.05 of unfavorable earnings per share impact in the Q1 from lower year over year Hobert prices and the Suffolk production disruption.

In total, we expect net sales of $11,900,000,000 to $12,200,000,000 organic net sales growth of 1% to 3%, adjusted diluted earnings per share in the range of 1.58 dollars to $1.72 and an estimated $100,000,000 to $150,000,000 of incremental benefits from the T and M initiative. To the entire Wormel Foods team around the globe, I thank you for your dedicated efforts in fiscal 2024 and I look forward to achieving our fiscal 2025 goals working alongside you. With that, I'll turn the call over to Jim.

Thanks, Jisim. Please advance to Slide 13, where we will begin the next portion of our call and provide an update on our transformation initiative. I will provide a brief introduction before turning the call over to Jisimth and Nathan. Just over 1 year ago, at our 2023 Investor Day, we announced the most transformative initiative in our company's history. Our commitment is to transform and modernize our processes, our portfolio and the way we create value.

We are doing this by investing in our people, data and technology and our brands. Today, you will hear about the significant progress we made in 2024 against our commitment. At Investor Day, we described 3 interconnected buckets of opportunity for earnings growth. As a reminder, the purpose of our growth initiative is to regain historical predictable earnings growth and drive long term value. The transform and modernize benefits generate incremental investment to drive business growth.

As our business grows, we expect to deliver even more benefits through our transformational initiative. We are creating a sustainable growth engine for the company and watching year 1 unfold in such a powerful way gives me confidence in our future. With that, I'll turn the call back over to Jacinth for you to hear more about our progress.

Thanks, Jim. As Jim noted, we have made significant progress in year 1. I will take a few minutes to talk about our successes to date and our expectations over the next 2 years inclusive of the investments we are making to drive those benefits. As a reminder, transform and modernize is not just a cost savings exercise, although that certainly is a real and substantial benefit. Rather, transform and modernize is about the way we do business across the enterprise and it involves every single member of the Hormel Foods team.

It is about reshaping how we operate, creating new opportunities for growth and generating a powerful growth flywheel. And to make all that happen, we're making strategic investments in key areas of the business. As we shared with you last year, we have organized the initiative into 5 pillars. 4 of those pillars focus on supply chain efficiency. With plan, we are adopting a holistic approach to end to end planning.

With buy, we are implementing new more sourcing events to reduce costs and improve our procurement structure and tools. With Make, we're standardizing ways of working to improve yields, increase capacity and avoid unnecessary CapEx. And with Move, we're assessing and addressing near term capacity and long term network optimization. Regarding portfolio optimization, we're finding new ways to reduce complexity, address low margin items and create room in our portfolio for further innovation. This work is being done at both the brand and business level to ensure our portfolio reflects our company's strategy and leverages our core competencies.

Nathan will be providing more detail and actual examples for each of these 5 pillars in just a few minutes. But before I turn it over to Nathan, I want to reiterate that year 1 of Transform and Modernize was a success, delivering $75,000,000 in benefits. It is important to note, however, that this only reflects the benefits from the buy, make and move pillars of our T and M initiative. Specifically, we have seen the greatest savings from the improvements in logistics, followed by raw materials and supplies and then manufacturing efficiencies. Looking at fiscal 2025, we are expecting annualized operating income benefits from TNM to be in the range of $100,000,000 to $150,000,000 compared with 2024 operating income and that is an addition to the $75,000,000 we achieved this past year.

In fiscal 2025, we expect the largest savings from these efforts to come through raw materials and supplies, followed by significant benefits from manufacturing and logistics. We also made excellent progress with our plan and portfolio optimization pillars. With our plan pillar, we expanded on our end to end planning capabilities. We are building an infrastructure that ensures a more accurate demand signal flows through to our supply planning, and that is absolutely critical. With portfolio optimization, we have made progress in harnessing the power of our portfolio, which is resulting in a more consumer centric, less complex, more profitable product mix.

More broadly, we believe the TNM initiative is enhancing Hormel Foods' capabilities and unlocking our full potential. As I mentioned before, this is not just a cost savings initiative. We are making foundational investments in data and technology and people and processes to transform our company. In total, we are expecting to spend approximately $250,000,000 through 2026. Taking a closer look at our spend within the people and process category, we are investing in talent and upskilling our team members while creating a much more data driven and analytical organization with modern processes.

Importantly, we are driving complexity out of the organization. With our data and technology investments, we are building the analytical capabilities to make empowered decisions based on strategic insights to gain a competitive edge across all of our businesses. Ultimately, we believe we are creating an incredibly powerful flywheel of sustained value creation. By focusing on investments, transformation and growth, we are laying the foundation for profitable and predictable growth, not just today, but for years to come. With that, I'll turn the call over to Nathan Annis, our Vice President of Corporate Development, who will provide a deeper dive into our transformational initiative.

Thank you, Jacinth. It has been a couple of years since 2021 when I was last in Investor Relations, and it's exciting to be back giving you an update on our Transform and Modernize initiative and to review some case studies that highlight our progress and the value we're creating. Our Transform and Modernize initiative is reshaping how we operate across the company in 4 key ways. 1st, our processes have historically been built on deep institutional knowledge and were quite manual. As our company has grown, these processes became more complex and highly customized.

We have started transforming these processes into streamlined, enterprise wide ways of working that leverage intelligent automation and digitization. I cannot overstate how critical this changes to all the work we are doing in our initiative. Next, our key capabilities like business planning and execution used to be siloed and under leveraged. Over the recent years and quarters, we've moved to centralize these functions to capitalize on our scale, while also strategically investing in areas where we are differentiated in the marketplace. Historically, our business was overly complex, bogged down by a lengthy list of vendors and SKUs.

Looking ahead, we are simplifying our operations in a smart, data driven way. We're also strategically segmenting our business to optimize our investment. Last, where we once had a variety of methods for identifying and realizing value and savings, we now use a standardized, more disciplined approach. This new process ensures we are capturing value consistently with clear accountability tied to key metrics. These four strategic changes are integral to the work we are doing and our team is setting a new standard for excellence in these areas.

Now, let's explore some specific examples of how these changes are making a difference in the 5 pillars, beginning with buy. This pillar represents a comprehensive enterprise effort to develop a new framework and tools for procuring goods and services across the entire organization. Our prior efforts of creating one supply chain and restructuring our segments through go forward are paying dividends as we scope opportunities. Viewing procurement through an enterprise wide lens allows us to significantly transform how we operate. For instance, we're establishing a new operating model that includes a modern structure, standardized training and updated policies and governance.

Additionally, we're adopting new procurement systems such as advanced sourcing tools, should cost modeling capabilities and enhanced data visibility and analytics. In 2024, we began implementing the bi pillar by focusing on categories and cost of goods sold and indirect spend. For 2025, our goal is to target the remaining categories across our P and L. By 2026, we expect this new approach will be fully embedded in our culture and we anticipate benefiting from consistent year over year productivity growth. A great example of our efforts with the BiPillar is a recent sourcing event focused on routine supplies and parts for our manufacturing facilities.

In the past, these items were procured through a fragmented process with hundreds of vendors and inconsistent purchasing methods. By streamlining our sourcing strategy and using enterprise wide agreements, we've significantly reduced complexity and our number of vendors while targeting improvements in our inventory levels. This project is just one of many that we are implementing to drive value. By incorporating these new tools and methodologies into our operations, we are developing a procurement function that delivers substantial financial savings, boosts cash flow and sets the foundation for sustainable benefits well into the future. In the make pillar, we are transforming the way we manage our manufacturing network to boost efficiency, increase capacity and reduce cost through the implementation of our proprietary Hormel Production System or HPS.

The essence of HPS lies in standardizing the ways of working across all our manufacturing facilities. By introducing consistent management processes, backed by a maturity model that ensures accountability, we are embedding the right practices at every level of our organization. Initially, we've concentrated these efforts on facilities facing capacity limitations. HPS is not only enhancing production yields and improving capacity, but also boosting team member engagement, while reducing downtime, working capital and overall cost. A standout success story from the Hormel production system comes from our efforts to address production bottlenecks for Hormel Bacon 1 fully cooked bacon at our Wichita, Kansas facility.

Our foodservice team has consistently driven growth for this differentiated and highly profitable brand, but our capacity limitations were hindering our ability to fully meet demand. A possible solution was to add new production lines, which would have been expensive and require significant lead time to implement. By deploying HPS at Wichita, we increased capacity by approximately 18%. This increase not only allows us to meet future demand, but also brings lasting improvements in productivity, cost efficiency and team morale. By extending these best practices to other facilities facing similar challenges, we're enhancing the agility and responsiveness of our manufacturing network.

This shift not only helps us keep pace with current demand, but also lays the groundwork for sustained long term growth. Our move pillar is all about enhancing our logistics network and boosting distribution capacity. A significant achievement in this pillar has been the renegotiation of enterprise wide freight rates. With a detailed freight RFP process supported by our procurement team, we have secured immediate cost reductions. Additionally, we have optimized the flow of finished goods through our network, effectively lowering landed cost.

Looking forward, a key milestone for the move pillar will be the opening of a new distribution center in the Memphis metropolitan area. Scheduled to become operational in the second half of twenty twenty five, we expect this facility will greatly improve our inventory management and expand our distribution capability. Reiterating what Jisinthe shared, our investments go beyond just cutting costs. They're crucial for creating a more robust and scalable logistics network. The plan pillar is perhaps the most extensive and complex of our 5 pillars, and we believe our work here will revolutionize our approach to end to end planning across the company.

Historically, our planning processes have been overly manual, dependent on spreadsheets, legacy technology and numerous different processes. Our efforts are fundamentally transforming our planning function by centralizing these activities, adopting integrated business planning across all business units and embedding more data analytics and AI to guide our decisions.

this comprehensive, integrated and scalable approach will enhance service levels, reduce costs, decrease working capital and improve engagement for hundreds of team members across various functions. This all sets the stage for a more efficient and responsive organization. Portfolio optimization is a critical element of this initiative and is designed to reshape our product portfolio to improve margins and drive top line growth. This strategic focus touches all pillars and ultimately enables us to streamline operations and concentrate on the most profitable and growth oriented categories. Historically, we have had a long tail of unprofitable or low volume items and we have managed these inconsistently across the enterprise.

The restructuring of our company through go forward has allowed us to take a more enterprise approach. And during 2024, our efforts have centered on creating a rigorous process to consistently assess and manage every item in our portfolio. As a result of these strategic evaluations, we've taken decisive steps, including divesting a non strategic business, Hormel Health Labs. Additionally, we've taken action on a large number of low volume or unprofitable SKUs and we will continue to right size our portfolio. Portfolio optimization is also about strategically reinvesting in innovation and we are tailoring our portfolio to resonate with current consumer and operator trends to fuel sustainable growth.

This ongoing process ensures that each product in our portfolio is capable of making a significant contribution to our revenues and margins, ensuring Hormel Foods remains a leader in the marketplace. We made excellent progress in 2024 and we're excited to continue our work and drive accelerated value in 20252026. Through continued investments in data, people, process and technology, we are unlocking the potential of our people across the enterprise and positively impacting all aspects of our financials. We're incredibly excited by how these 5 pillars have become increasingly interconnected and how the work has converged with other enterprise objectives. The merging of these activities means that they are rapidly becoming ingrained in our culture and helping to transform Hormel Foods into a more efficient, responsive and competitive company.

And with that, I'll hand it back over to Jim.

remarks this morning, I think it's important to recognize that we are a stronger company today because of the strategic actions we've taken in the past, like 1 Supply Chain and Go Forward. These actions combined with our transform and modernize initiative positions us for continuous improvement, profitable and predictable growth and sustainable long term shareholder value creation. We remain committed to our long term growth algorithm of generating between 2% to 3% organic net sales growth and between 5% to 7% operating income growth. There are many reasons to believe in our long term strategy. We have a portfolio of leading and differentiated brands which are fueled by innovation.

We are organized for long term growth with an ability to deliver stable financial performance and we do all of this with a focus on being a strong corporate citizen. We are building a more efficient, scalable and adaptable organization that is well positioned to meet the demands of an evolving marketplace. All of this would not be possible without the dedication and performance of our team members and I want to thank them for their hard work and commitment. With that, Jasinthe, John, Nathan and I will take your questions.

Thank Your first question comes from the line of Rupesh Parikh from Oppenheimer. Please go ahead.

Thanks for taking my question. So I wanted to go back to the FY 'twenty five guidance range. I know you guys gave some color in terms of how think about some of the puts and takes, but I was hoping if you can go deeper into some of

the variables to get you to the low or high end

of the range. And then it sounds like Q1 will be the most challenged. So just also want to get a sense of whether you think you can actually grow earnings in Q1? Thank you.

Yeah. Thanks, Rupesh. The important thing for our 2025 outlook, right, is it demonstrates growth on top and bottom line. It's realistic. It's achievable.

And it's consistent with how we've messaged about the business. As we're thinking about 2025, we expect growth in key retail categories, bacon, Applegate. We've talked about our flagship and rising brands and the success we're having there. Again, this successful pipeline of innovation is going to be really important. The value we create in a unique manner with our food service business, continued growth from international after an impressive rebound in 2024.

We do expect growth again in 2025. Our value added turkey business is an area of the business that's really, really strong, whether it's our lean ground Turkey or the business in food service. The other part I think that is really important to call out is the additional brand support that we are planning in 2025. So, we've got a strong double digit increase plan to support our brands. And then we'll be making other additional investments as part of this transformation initiative, whether it's the people, the processes, the data and technology, And we have available capacity to support all of this growth that we're expecting.

And so, we do expect some near term impacts in Q1, commercial impacts for planters, wraparound impacts on the whole bird turkey business. And then the other part is really our this transformation and modernization initiative, Over delivering strong performance in year 1, acceleration in year 2. And when we put all of that together, that's what really gives us confidence. And so we're entering 2025 with momentum in this underlying business with really great support all around it. And when you couple that with the performance and the strength of the transformation initiative, that's really where we are and why we have confidence in our ability to grow top and bottom line in 2025.

Yes. And good morning, Rupesh. And in terms of the guide, what Jim just articulated is really what gives us confidence to hit the midpoint. But when we think about what gets us to the higher end of the range, it's a couple of key things, right? Higher volume, a better product mix and improved turkey market, planters over delivery and certainly as Jim talked about, just the strength and over delivery on our TNM initiative certainly gives us the opportunity to get to that higher end.

Great. That's helpful color. Best of luck. Thank you.

you. And your next question comes from the line of Ken Goldman from JPMorgan. Please go ahead.

Hi, thank you. And just to follow-up on that question. Your underlying EBIT growth, and we just exclude T and M this coming year, is expected to decline. I think the math works out that way. You do have you talked about some of the headwinds in 1Q.

You talked about the investments that you're making. Is there an element of conservatism or prudence or whatever word you want to use? I know, Jim, you talked over the last year about maybe wanting to add, I don't know, a dash or a dollop of incremental conservatism into your guidance. I'm just trying to get a sense of if you feel like this range does factor in some unforeseen events to the downside that you know, in a way that maybe you hadn't as a company in the longer term past?

Yes. Ken, thanks for the question. Starting with the transform and modernize initiative. I think one thing that's really important and I'm sure we'll talk more about it over the balance of the call is this really isn't a like standalone dollar amount that we should be looking at because this really is interconnected into the business. And the term that we've started to use internally is this flywheel to generate growth.

Because it is, as business grows, we get more benefits and as we get more benefits, we're able to reinvest in the business. And so, this is a holistic look at our business and the growth that we expect to achieve in 2025. Your comment on conservatism, I think from where we sit, we want to make sure that we're always appropriate. And when we think about items that have had a lot of volatility, we've talked probably unnecessarily about Turkey in the last couple of years. And so, we want to make sure that given that recent volatility, we are appropriate in how we plan and guide the business.

The other part is this planters rebound. And we want to make sure again that we get this right as we start to really scale the commercial piece of this, as we've navigated our way through the production concerns that are largely resolved. And so our ability to fill holes faster, right, we're turning on advertising, we're turning on innovation, that's what really, in my mind, makes this plan realistic, achievable and appropriate.

Great. Thank you. And if I can ask a quick follow-up. Are you still planning on, I think you are, dollars 250,000,000 of net operating income improvement from 23% to 26%. And the reason I'm asking is it just mathematically requires a reasonably high step up in 2026 at this point.

Just curious if that's still the case and if so kind of what you think without obviously providing 'twenty six guidance, some of those refactors might be?

Yeah. Thanks, Ken. You're right. We're not guiding $26,000,000 But we are on track for the $250,000,000 And there are a lot of things to feel good about and that we're excited about. It's this trajectory of T and M after a successful year 1, which is now interconnected into this flywheel.

And we are creating this long term lasting value. We're building processes. We're building capabilities. But underpinning that is the strength of the brands and the business. We're talking more about flagship and rising brands and how important they are to our portfolio and they're growing, our foodservice business continuing to be differentiated and growing in the marketplace, and then our international piece.

So, yes, we're on track and what gives us confidence is really the strength of the underlying business coupled with that transformative initiative. So, really, really good progress. And I know you heard from Nathan in the prepared remarks, and I'm sure we'll get some additional questions, but we're in a really good place.

Thank you. And your next question comes from the line of Thomas Palmer from Citi. Please go ahead.

At the midpoint, your guidance implies around $85,000,000 operating profit growth. You expect 125 dollars from cost savings and also organic sales growth. I just want to make sure I'm thinking through the pieces you laid out that might limit the flow through of these two items to operating profit. So it sounds like advertising could be higher in the $20,000,000 range. I think Turkey plus Suffolk could net out for the year to maybe a slight headwind.

I'm just trying to bridge what else is kind of limiting this flow through, make sure as we think through this year.

Yes. Good morning, Tom. I just want to just clarify that our Transform and Modernize initiative isn't just the cost savings initiative. It is about reinvesting in the business for growth. And Jim mentioned this flywheel and that's exactly how we're thinking about it as we go through what is we're targeting as a 3 year initiative, but really it goes beyond that.

And it's a foundation to set the company up for long term growth and we're getting value beyond 2026. But in terms of your specific questions as to what's included in the midpoint there, Jim mentioned already how we're thinking about Holbrook and how we're thinking about Turkey pricing. Certainly prices were depressed coming out of Q4 and we are expecting that to what we've baked in is for the full year that Turkey will remain at those lower levels for 2025. In addition to the fact that we are making double digit investment in our brand for 2025 and that's included as well in that guide, in addition to investing in capabilities for our business as it relates to the T and M initiative from data and technology, and also around our people.

Okay. Thanks. And then just on what's going on with Cell Focus. It's kind of been a couple of quarters now delaying the restart. I guess what's really contributing to that slower ramp and why the confidence now that kind of 1Q will be the end of the issues?

Yes, that's an important part of 2025, Tom. And it is it's important to know that we've made significant progress in Q4 regarding the situation. So our production concerns are largely resolved. And, we're in a good place from a supply perspective that's ramping up and continuing to build. Couple of other pieces that I think are important and I'm going to let John probably get into more specifics.

But as a reminder, right, we had tremendous momentum in the planters business last year, right? And since the time of acquisition, we've had a lot of positive data, right? The work that we've done, whether it's volume, sales, shares, right? That's what gives us the confidence about where we were and where we know we can get this business back to. And a lot of that work is obviously, it happens in retail and food service, but an outsized portion is in retail.

Thanks, Jim. Good morning, Tom. So I'll just comment briefly on the planters recovery and kind of next steps around planters. This quarter, the Q1 is largely refilling retailer shelves, replenishing retailer inventories, replenishing our own inventory, essentially refilling all of those gaps that were created in the back half of last year as we dealt with the supply disruption. By the end of the Q1, we will be in a position to fully meet retailer demand across the entire planters portfolio.

In the meantime, we are seeing some progress in our scanner data. So, our baseline trends are improving sequentially over the past 2, 4 week periods, meaning baseline declines are lessening versus prior year. And what's driving that is a restoration of loss distribution on those items that were impacted by the supply disruption at retail. In fact, more than half of that distribution has been recovered at this point versus where we were at our low point. So we still have more to do over 2025 on that recovery, but we are very encouraged by the good progress at this point.

We have chosen in the near term to scale back some of the merchandising activity, in particular in November December. So our Q1 data will be a little bit choppy from the scanner, but we're prioritizing getting the base replenished and getting the shelf back to where it needs to be. Now as we get into the Q2, we will start to dial back up promotions, we will dial back up advertising, we will start to attract consumers back to the brand and begin to recapture that momentum that Jim commented on. I mean, in general, Planters is a great platform for us. It's sitting in a wonderful space.

The macro snacking space continues to be a great consumer space. The substantial nature of Planter's portfolio really fits with what consumers are looking for in terms of more substantive fuel oriented snacks. We have a leading brand that's very responsive to advertising, to promotions on its core with a lot of innovation potential. Just looking at some of the innovation we were driving behind our flavored cashews and duos lines, they were attracting new households, bringing in younger consumers. We're going to continue driving that and we have restoration of advertising spend on planters that will help us do that.

And just a reminder, I mentioned it in my prepared remarks, but in Q1, as John is mentioning here, that's going to be a period of recovering from a financial impact standpoint, there is going to be $0.04 to $0.05 of impact unfavorably in the quarter split between whole bird, Turkey and Planters and that's about a fifty-fifty split. But the key takeaway here is Planters is a brand that is strong and we expect to benefit from recaptured momentum in Q2.

Thank you. And your next question comes from the line of Heather Jones from Heather Jones Research. Please go ahead.

Good morning. Thanks for the question. I guess my first question is wondering, it sounds like as part of the TNM initiative, there could be further SKU rationalization. So I was just wondering if the sales and volume guidance you gave, I know it excludes the Hormel Health Labs, but does it anticipate further SKU rationalization?

Yeah. I think all of that's embedded in our guidance, Heather. I think your call out on Hormel Health Labs is important. You think about the top line impact of $100,000,000 the bottom line impact of it's a $0.01 EPS, but that does figure into the year over year comparison. The work that we are doing on TPO is included in our guide.

I'll maybe ask Nathan to comment a little bit more about it to give you some additional color.

Yes. Hi, Heather. This is Nathan. As we think about portfolio optimization and how it's built into next year, I would think about it in 2 different ways. First, it's all baked into the guidance.

Hormel Foods (HRL) Q4 2024 Earnings Call Transcript

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