Hormel looks to 2010

Published 6:37 am Monday, November 30, 2009

After catching its breath over Thanksgiving, Hormel Foods Corp. is turning its attention to the 2010 fiscal year. Part of the 2010 focus will include increased advertising and a campaign that could kick off in February.

Hormel had a busy week leading up to the holiday as the company released earnings from the fourth quarter and fiscal 2009 on Tuesday.

Then on Wednesday, Hormel took time to celebrate a record profit sharing of $15.9 million. However, Austin Plant Manager Mark Coffey stressed that his employees would start working toward a strong 2010 on Friday.

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“There’s no sliding in anything,” Coffey said. “We’re going to take today, and we’re going to pause, and we’re going to celebrate. Today’s going to be a fun day. But tomorrow, we’re going to be right back at it working hard, looking for ways to get better for 2010.”

Coffey spoke to his employees about being ready to continue performing in the new year, and he said posters with the plant’s goals for the year are posted around the building.

Along with motivating employees to continue hard work in the new year, Hormel executives are also looking to build off a strong finish to the 2009 fiscal year.

Hormel has set their earnings guidance range at $2.63 to $2.73 per share for fiscal 2010. Earnings from fiscal 2009 equaled $2.53 per share as the company reported net earnings of $342.8 million. That was up 22 percent from last year when Hormel reported net earnings of $285.5 million, or $2.08 per share.

Hormel reported fourth quarter net earnings of $103.9 million, which was up 53 percent from earnings of $67.8 million last year. However, sales, at $1.68 billion, were down 10 percent from the same quarter in 2008.

The sales decline in the fourth quarter was larger than Hormel officials expected. Hormel CEO Jeffrey Ettinger announced in a conference call that Hormel plans to increase its advertising expenditures for the fiscal 2010 year.

“To continue building on the success of our brands in fiscal 2010 we will increase our advertising spend level,” Ettinger said in a conference call Tuesday. “This, in conjunction with enhanced promotional efforts, should allow us to maintain and grow market share.”

Advertising expenses accounted for 1.1 percent of sales for the fourth quarter, compared to 1 percent in 08. Advertising expenses in fiscal 2009 were 1.4 percent of sales compared to 1.5 percent in fiscal 2008.

Ettinger said Hormel plans to kick off an advertising campaign for the umbrella Hormel brand in February.

One area where Hormel struggled in the 2009 fiscal year was their microwavable line, which includes the microwavable meals Compleats. Ettinger said that’s a key area the company will look to improve in during the 2010 fiscal year.

“We still view Compleats as being very strong contemporary items that are good value for consumers and that are worth getting behind,” Ettinger said.

Gains in revenue will also be a focus for the company, but Ettinger said improvement likely won’t occur until later in the fiscal year.

“It may not happen right away, but we expect to see this increase by the second half of the year,” Ettinger said.

The first half of the year could see benefits from more normal input costs and reduced expenses in freight and warehouses, he said.

“The first half of the year on an overall basis, we are expecting it to be flat to even potentially slightly down as built into our plan for next year, gaining some momentum as the year goes on,” Ettinger said.

Ettinger hopes to see growth in the second half of the year. One thing that may drive that growth is the formation of MegaMex Foods. Hormel and Herdez Del Fuerte, S.A. de C.V. closed a deal Oct. 26 to form MegaMex Foods, a company to market Mexican foods in the U.S.

Despite reduced exports to China, Ettinger said exports to Mexico have been strong. He also said exports to China could open up soon.

Ettinger said Hormel is also expecting improved earnings from Jennie-O Turkey as supply and demand balances out.

Hormel is preparing for higher pension expenses in 2010, and the company has planned for an extra week in the 2010 fiscal year.