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Hormel Foods Inc. stock soared 8.3% in Thursday trading after the parent to Spam, Skippy peanut butter and Jennie-O turkey saw food-service sales jump 28%.
The food-service category took a beating during COVID-19 with many cafeterias, event stadiums and other venues closed or operating at reduced capacity.
Hormel says it took steps to meet the business needs of its clients, including a rebate program to offset food costs, payment extensions, and measures to help companies that had to transition to an increase in takeout and delivery.
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Hormel also put its direct sales team into action to help operators with products that can help to simplify food preparation and minimize labor needs.
The company called out items like Wholly Guacamole, Hormel Fire Braised meats and the brand’s fully-cooked bacon as items that helped in these fluctuating times.
“The brightest spot in our foodservice portfolio has been our pizza toppings business,” said James Snee, chief executive of Hormel, on the earnings call, according to FactSet.
“Prior to the pandemic, we capitalized on the continued growth in this category, especially for premium products, and invested heavily in capacity to meet future demand.”
Hormel is also investing in plant-based pepperoni and other plant-based meat alternatives.
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Foodservice sales increased 28% for the quarter. The refrigerated foods segment of the business up 32%, which Snee said was owing to the growth in food service.
Premium breakfast items, like the Old Smokehouse brand, also saw a sales recovery.
And items typically found at the center of the grocery store, like Spam, Hormel chili and Mary Kitchen hash, jumped 20% higher compared with the second quarter of 2019.
Hormel reported second-quarter earnings and sales that exceeded expectations.
The company has invested in a grocery product distribution center and a refrigerated product distribution center that, Snee said, “will reduce overall freight miles and costs, improve our customer service levels, support growth for our value-added businesses and reduce greenhouse gas emissions.”
Hormel raised its full-year sales outlook to $10.20 billion to $10.80 billion from $9.70 billion to $10.30 billion. The company still expects EPS to be $1.70 to $1.82.
The Hormel outlook doesn’t include the impact of the Planters acquisition, announced in February.
The FactSet consensus is for sales of $10.10 billion and EPS of $1.73.
“We have a very positive outlook on the food-service industry and continue to see elevated demand in the retail, deli and international channels,” Snee said in a statement.
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Looking ahead, Hormel forecasts continued increases ahead.
“[W]e are increasingly confident that K-12 schools and colleges and universities will open and operate in a more traditional manner this fall. This should benefit both refrigerated foods and Jennie-O Turkey Store,” Snee said.
Hormel stock has gained 6% for the year to date while the S&P 500 index
SPX,
is up 10.7% for the period.
