001147 Hormel Profit Up, But Misses Forecast

Austin, MN - Hormel Foods Corp., maker of SPAM luncheon meat and Dinty Moore beef stew, said that net income rose a lower than expected 2.2% in its fiscal fourth quarter due to a slowdown in grocery product sales.

The company reported net income of $61 million, or 44 cents a diluted share, for the three months ended Oct. 28, compared with $59.7 million, or 41 cents, a year ago, on a 2-for-1 split-adjusted basis.

Analysts on average forecast earnings of 45 cents a share, according to research firm First Call/Thomson Financial.

Total dollar sales rose 5.8% to $1.01 billion from $950.8 million, and sales tonnage gained 0.2% last year.

Hormel said a 6.5% decline in grocery product sales hurt results. Year-ago comparisons were hurt by last year's unusually high level of shipments due to millennium-related fears.

Last year, both stores and consumers stocked up on products that have long shelf-lives, such as Hormel chili, Merrill Lynch analyst Leonard Teitelbaum said.

The company said fiscal first-quarter sales will be weak compared with last year due to Y2K-related shipments, but comparisons should improve in the second and third quarters.

Teitelbaum, who upgraded his rating on Hormel to long-term buy from accumulate, said he expects to see a change in sales after the beginning of the new year. He also noted the Austin, Minn., company is taking the Spam brand name across other products, such as turkey.

Sales at the food-service unit of Hormel's refrigerated foods division increased 25.9% over last year, and sales from the meat products unit rose 10.4%.

“A lot of the food-service people are getting good currency saying they use these products,” Teitelbaum said, referring to Hormel brands that are now sold in restaurants and cafeterias. “There's an advantage, and Hormel is capturing it by moving into the food-service business.”

Hormel said live hog prices that were 25% higher than last year hurt the division's margins.

Sales dollars of the company's Jennie-O meat products rose 8.8% in the fourth quarter.

Export sales dollars for the quarter rose 19%.

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