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Hormel Foods Corp HRL

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Narrow-Moat Hormel Is Managing Inflation and Shortages Well, but Shares Priced for Perfection

Analyst Note

| Rebecca Scheuneman, CFA |

Like its packaged food peers, Hormel is experiencing significant challenges stemming from labor shortages, supply chain disruption, and inflation. But we think Hormel’s strong brands (one factor underpinning its narrow moat) should allow the firm to successfully pass higher costs to consumers. In fact, management said its brands are outperforming the volume impacts predicted by its elasticity models. Further, as many of the products Hormel sells to the food-service channel are prepared foods--designed to help restaurants save on labor costs--strong demand for these items is driving market share gains for Hormel, with the quarter’s food-service sales 16% above the comparable quarter in 2019, although a portion of the gain is driven by price.

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Company Profile

Business Description

Hormel Foods is a protein-focused branded food company. Its brands include its namesake Hormel, Spam, Jennie-O, Dinty Moore, Applegate, Wholly Guacamole, and Skippy. The vast majority of the company’s revenue is U.S.-based: 67% U.S. retail, 26% U.S. food service, and 7% international. By product type, in fiscal 2020 22% of revenue was shelf-stable foods, 20% was poultry (branded and commodity), 55% was other perishable food, and 3% was other, primarily nutritional products. The company holds the number-one market position in shelf-stable meat, shelf-stable ready meals, pepperoni, natural/organic deli meat, guacamole, and the number-two position in turkey, bacon, chilled ready meals, and peanut butter.

Contact
1 Hormel Place
Austin, MN, 55912-3680
T +1 507 437-5611
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Jul 31, 2021
Fiscal Year End Oct 25, 2021
Stock Type Slow Growth
Employees 20,000

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