Hormel Foods Corp. 10-Q Summary: Fiscal Q1 2026
Business Context and Reporting Period
This report covers the quarterly period ended January 25, 2026 (Fiscal Q1 2026). Hormel Foods Corporation is a global manufacturer and marketer of branded food products operating through three segments: Retail, Foodservice, and International. The company is a large accelerated filer with 550.3 million shares of common stock outstanding as of February 22, 2026.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Net Sales | $3,027.3 million | $2,988.8 million |
| Gross Profit | $469.6 million (15.5% margin) | $475.2 million (15.9% margin) |
| Operating Income | $243.7 million | $228.3 million |
| Net Earnings (Attributable to Hormel) | $181.8 million | $170.6 million |
| Diluted EPS | $0.33 | $0.31 |
| Operating Cash Flow | $349.2 million | $309.2 million |
| Total Debt | $2.86 billion | $2.86 billion |
| Cash and Equivalents | $867.9 million | $840.4 million |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 1.3% year-over-year, driven by a 7.3% increase in Foodservice and 7.6% in International, partially offset by a 2.2% decline in Retail. Organic net sales grew 1.6%.
- Profitability: Net earnings rose 6.6% to $181.8 million. However, Adjusted Diluted EPS (non-GAAP) decreased 2.9% to $0.34, reflecting the exclusion of a one-time gain.
- Segment Performance:
- Retail: Profit declined 19.3% due to lower sales, higher raw material costs (beef, pork trim, nuts), and increased logistics expenses.
- Foodservice: Profit increased 12.8% driven by pricing actions and strong performance in customized solutions.
- International: Profit increased 9.9% due to growth in China and lower SG&A, offset by lower export margins.
- Divestitures: The company sold 51% of its equity interest in Justin's, LLC for $77.3 million, recognizing a pre-tax gain of $23.5 million. This transaction resulted in the deconsolidation of Justin's.
- Restructuring: The company recognized $8.5 million in restructuring costs related to a corporate plan to reduce administrative expenses.
Guidance, Outlook, and Risks
- Outlook: Management expects net sales growth for fiscal 2026, assuming broad category growth and market-based pricing. The effective tax rate is expected to be between 21.5% and 22.5% for the full year.
- Capital Allocation: Capital expenditures for fiscal 2026 are estimated between $260 million and $290 million. The company paid a quarterly dividend of $0.2925 per share (1% increase) and did not repurchase shares in the quarter.
- Risks and Contingencies:
- Logistics: Increased logistics costs due to winter weather and tight freight capacity are pressuring margins.
- Trade Policy: Tariffs and retaliatory tariffs had a minor impact in Q1 but remain a monitored risk.
- Legal: The company is involved in pending Turkey Antitrust Litigation; no liability has been recorded as a loss is not deemed probable. Pork Antitrust Litigation was largely dismissed.
- Commodity Prices: Fluctuations in grain, lean hog, and energy prices remain a key risk, managed through hedging programs.
- Unusual Items: A $23.5 million gain on the sale of Justin's LLC and $27.2 million in non-recurring expenses (Transform & Modernize, restructuring, consulting agreement) significantly impacted GAAP results.
Investor Verification Checklist
- Adjusted EPS Decline: Verify the impact of the $23.5 million Justin's gain on GAAP EPS versus the 2.9% decline in Adjusted EPS.
- Retail Segment Pressure: Assess the sustainability of the Retail segment's profit decline given rising input costs and logistics expenses.
- Divestiture Accounting: Confirm the treatment of the remaining 49% equity interest in Joy Topco LP (formerly Justin's) as an equity method investment.
- Restructuring Costs: Monitor the remaining estimated cash expenditures of $9.0 million for the corporate restructuring plan.
- Legal Exposure: Review the status of the Turkey Antitrust Litigation and potential future accruals.