DOW JONES NEWSWIRES
Hormel Foods Corp.'s (HRL) fiscal first-quarter net income
slipped 7.7% amid continued pressure from higher feed and fuel
costs and falling volume.
The meat industry, like many others, is reeling from declining
demand and oversupply, forcing producers, processors and
supermarkets to cut production and prices.
For the quarter ended Jan. 25, the maker of Spam and Dinty Moore
stews posted net income of $81.4 million, or 60 cents a share, down
from $88.2 million, or 64 cents a share, a year earlier.
Revenue climbed 4% to $1.69 billion as the recession has had a
"mixed effect" on sales, boosting demand for retail products while
areas such as new convenience items have weakened. Volume dropped
1%.
Analysts expected per-share earnings of 51 cents on revenue of
$1.73 billion.
Gross margin decreased to 16.1% from 18.1% on feed and fuel
costs.
Despite higher costs, analysts say production cuts will help
keep meat prices down. Unlike other commodity sectors were supply
levels are relatively easy to manage, animal life cycles prevent
livestock producers from reacting quickly to changes in the market.
Thus, to reflect lower global demand, meat producers and processors
must cut the amount of food they produce and lower prices to rid
themselves of the oversupply.
Jennie-O Turkey continued battling ample supplies and higher
feed and energy expenses, as profits dropped 16%. Chief Executive
Jeffrey Ettinger said strong canned meat and retail products sales
helped offset Jennie-O weakness.
Shares of Hormel, which affirmed its downbeat fiscal-year
earnings forecast, closed Wednesday at $30.42 and there was no
premarket trading. The stock is down nearly 20% the past four
months, much less than the market average.
-By Katherine E. Wegert, Dow Jones Newswires; 201-938-5400;
katherine.wegert@dowjones.com
