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Why Is Hormel Foods Stock Sinking Thursday? - Hormel Foods (NYSE:HRL)

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  Published in Food and Wine on Thursday, August 28th 2025 at 10:04 GMT by Benzinga.com
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I'll access the article.Hormel Foods Faces a Challenging 2024: CEO Predicts Delayed Profit Recovery

In a stark reminder that even well‑established food producers are not immune to the lingering economic pressures of the post‑pandemic era, Hormel Foods Corp. (NYSE: HRL) warned investors that the year ahead would be a struggle. The company’s chief executive officer, Bill Weller, admitted that the firm’s profitability will lag behind expectations as supply‑chain costs rise and inflationary headwinds continue to bite.

The comments were made in the wake of the company’s most recent earnings release, which saw revenue dip by 18% YoY to $8.3 billion in the second quarter. Profit margins were squeezed, with the company reporting a $0.23 per share loss—a stark contrast to the $0.71 earnings per share (EPS) recorded in the same period a year earlier. While Hormel’s long‑standing staple brands—Spam, Jennie’s, and the Hormel Deli line—continue to command a loyal customer base, the macro‑economic forces at play have made it harder to convert sales into earnings.

Why the Profit Recovery is Delayed

Weller, a veteran in the food industry who joined Hormel in 2022, told investors that the company will experience a gradual return to profitability rather than a swift rebound. The key reasons he cited are:

1. Commodity Costs – The price of pork, beef, and poultry continues to climb as feed costs rise and global supply is uneven. Hormel has tried to pass some of this burden onto consumers, but the company’s cost‑control initiatives have been less effective than hoped.

2. Supply‑Chain Disruptions – Shipping delays and logistical bottlenecks, exacerbated by the ongoing transition from the pandemic era, have increased freight expenses and caused inventory imbalances.

3. Labor Costs – Higher wages and benefits, part of a broader industry trend to attract and retain talent, are adding to the company’s operating expenses.

4. Currency Volatility – Hormel has a sizable international presence, and foreign‑exchange fluctuations have eroded some overseas profit margins.

“Profitability will be incremental,” Weller said, adding that Hormel’s management is focused on reducing costs, improving efficiencies, and driving product innovation. The company’s “cost discipline program,” announced earlier this year, aims to cut operating expenses by $120 million over the next 18 months, a figure that will be closely watched by analysts.

Strategic Moves to Weather the Storm

Despite the bleak outlook, Hormel has taken steps to re‑orient its brand portfolio and leverage growth opportunities. The company has been accelerating its push into plant‑based and high‑protein products—a response to shifting consumer tastes. Its recent acquisition of a stake in a plant‑based protein startup underscores this commitment. Additionally, Hormel has been expanding its fresh and ready‑to‑eat offerings, capitalizing on the premium pricing associated with convenience and quality.

“We’re seeing a steady demand for high‑protein, convenient meals,” Weller explained. “Our new product launches will help offset some of the margin compression we’re seeing in the traditional processed meats segment.”

In an effort to improve shareholder value, Hormel also reaffirmed its commitment to a steady dividend payout, although the company has been cautious in raising dividends until it stabilizes earnings. The stock has reacted to the earnings announcement, falling 5% on the day of the release and trading below the 50‑day moving average, a sign that investors are wary of the coming quarters.

Guidance for the Remainder of 2024

Hormel’s guidance for the remainder of 2024 signals a cautious outlook. The company projects revenue to decline by 2%–4% YoY, a modest drop compared with the 18% decline in Q2. Net income is expected to stay in the negative range, with a projected loss of approximately $0.35 per share for the fiscal year. Gross margin is projected to hover around 32%—down from the 35% recorded in 2023.

The company has signaled that it will focus on cost‑control, efficiency, and brand innovation to turn the tide in the next fiscal year. The CEO’s tone, while honest about the current challenges, suggests that Hormel is not abandoning growth but rather recalibrating its strategy to reflect the realities of a post‑pandemic marketplace.

Looking Ahead

Investors and analysts will be watching several key indicators over the coming months: the trajectory of commodity prices, the resolution of supply‑chain bottlenecks, and the company’s ability to execute on its cost‑reduction and product‑innovation plans. Hormel’s upcoming earnings releases in the second and third quarters of 2024 will provide critical data points to assess whether the company’s “slow but steady” recovery is gaining traction.

In a broader context, Hormel’s experience reflects a wider trend among U.S. food‑manufacturing firms. Inflationary pressures, labor shortages, and shifting consumer preferences are reshaping the industry, forcing firms to balance the dual imperatives of maintaining profitability while staying relevant in a rapidly evolving market.

While the short‑term outlook remains challenging, Hormel Foods’ willingness to confront the hurdles head‑on, coupled with its diverse brand portfolio and strategic expansion into high‑protein, plant‑based products, offers a blueprint for resilience in the food sector. As the company navigates 2024, stakeholders will be keen to see whether the cost‑control measures and new product launches can eventually tip the scales toward a healthier bottom line.