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Hillshire Brands (HSH)
Q2 2013 Earnings Call
January 31, 2013 10:30 am ET
Melissa Napier - Senior Vice President of Investor Relations
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Maria Henry - Chief Financial Officer and Executive Vice President
Kenneth Goldman - JP Morgan Chase & Co, Research Division
Akshay S. Jagdale - KeyBanc Capital Markets Inc., Research Division
John J. Baumgartner - Wells Fargo Securities, LLC, Research Division
Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division
Timothy S. Ramey - D.A. Davidson & Co., Research Division
Kenneth B. Zaslow - BMO Capital Markets U.S.
Robert Moskow - Crédit Suisse AG, Research Division
Robert Dickerson - Consumer Edge Research, LLC
Andrew Lazar - Barclays Capital, Research Division
Kenneth Perkins - Morningstar Inc., Research Division
Good morning, and welcome to the Second Quarter Fiscal 2013 Earnings Conference Call for Hillshire Brands. [Operator Instructions] This call is being recorded. If you have any objections, please disconnect at this time. I would now like to turn the call over to Melissa Napier, Treasurer and Senior Vice President of Investor Relations for Hillshire Brands. Thank you, Melissa. You may begin.
Thank you, Caroline. Good morning, everyone, and welcome to our second quarter earnings call. Our results were released at 6:30 a.m. Central Time this morning, along with an 8-K disclosing our financial results from continuing operations, adjusting for the pending sale of our Australian Bakery. You can find the release and the 8-K along with the slides that we'll be reviewing today posted to our website under the Investor Relations section. We also plan on filing our 10-Q later this afternoon.
I'm joined today by Sean Connolly, our CEO; and Maria Henry, our CFO. Sean and Maria will provide their perspectives on the performance of the business during the quarter. We'll take your questions after management's prepared remarks conclude. [Operator Instructions]
I'd like to refer you to the forward-looking statement currently displayed and remind you that during today's call, we may make forward-looking statements about future operations, financial performance and business conditions. And actual results may differ from those expressed or implied in these statements. Also during the presentation, we may refer to non-GAAP financial measures. Explanations of non-GAAP financial measures are included in our release.
I'll now turn the call over to Sean.
Sean M. Connolly
Thanks, Melissa. Good morning, everyone, and thanks for joining us this morning. Before we jump into the details of the quarterly results, let me take a step back and frame up the big picture for everyone.
Hillshire Brands is a focused food company. One that is committed to delivering growth and profitability through brand building and innovation across our terrific portfolio of brands. We have a disciplined plan to create value that also includes an intense efficiency mindset. After half a year, I feel very good about the progress we're making against our plan. Q2 was another strong quarter for Hillshire Brands, and we're pleased with our overall performance in the first half of fiscal '13. We continued to make strides in growing volume, revenue and adjusted operating income in the first quarter and the first half. Our brands continue to grow stronger and healthier as we invest in MAP support and innovation in our core business. Our profit was meaningfully helped by both lower input costs and our disciplined approach to SG&A spending. Also we entered into an agreement to divest our Australian Bakery operation. Once that closes, we will be able to focus 100% of our time and energy on driving growth and innovation across our North American Retail and Foodservice segment.
We also moved our corporate headquarters from Downers Grove to Chicago without missing a beat, an important step in our cultural evolution. Based on all of those items, as well as our outlook for the balance of the fiscal year, we are raising our adjusted EPS guidance to a range of $1.60 to $1.70 per diluted share.
Now let's dive into the segment results. I'll provide some commentary here on what drove our Retail and Foodservice performance, and Maria will provide more insight into the numbers a bit later in the call. We have now achieved 4 consecutive quarters of year-over-year volume growth in Retail. Clearly, the first half comps were easier than the second half will be, but we feel good about the progress we're making with our brands.
Over the first half of this fiscal year, we've meaningfully increased our investment in MAP to support our brands, as you can see on this slide, and as you know, this is a crucial step in our 3-year plan to deliver significant value. By consistently supporting our brands with MAP, they will be better positioned in the marketplace and perform more consistently over time.
I think that the Jimmy Dean business exemplifies this well. Jimmy Dean is lapping record high volumes in breakfast sausage rolls this quarter due to unusually heavy holiday merchandising last year. Despite that tough comp, the total Jimmy Dean franchise grew overall volume and revenue year-over-year behind strength in sandwiches and bowls, both of which had very strong MAP support.
We were also pleased to see Jimmy Dean's new biscuit line get off to a strong start. These products are consistent with our strategy to continue to push into snacking categories.
On Hillshire Farm, we were expecting to see lunchmeat begin to respond to our programming, and I'm pleased to say that it did. After a long time of very little MAP support, Hillshire Farm lunchmeat advertising is back in full swing. We returned to air late quarter 1 with a new campaign that takes the brand back to its quality heritage. As you all know well, Hillshire Farm lunchmeat has been struggling for some time now. So I'm pleased to say that with the support of our marketing tools, Hillshire Farm lunchmeat returned to volume growth this quarter.