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Hillshire Brands (HSH)
Q4 2013 Earnings Call
August 08, 2013 9:30 am ET
Melissa Napier - Senior Vice President of Investor Relations
Previous Statements by HSH
» The Hillshire Brands Company Management Discusses Q4 2013 Results (Webcast)
» Hillshire Brands Management Discusses Q3 2013 Results - Earnings Call Transcript
» Hillshire Brands Company Presents at 2013 Consumer Analyst Group of New York Conference, Feb-20-2013 01:45 PM
Maria Henry - Chief Financial Officer and Executive Vice President
Kenneth B. Zaslow - BMO Capital Markets U.S.
Robert Moskow - Crédit Suisse AG, Research Division
Kenneth Goldman - JP Morgan Chase & Co, Research Division
Robert Jan Vos - ABN AMRO Bank N.V., Research Division
Kenneth Perkins - Morningstar Inc., Research Division
Ann H. Gurkin - Davenport & Company, LLC, Research Division
Jason English - Goldman Sachs Group Inc., Research Division
Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division
John J. Baumgartner - Wells Fargo Securities, LLC, Research Division
Christine McCracken - Cleveland Research Company
Akshay S. Jagdale - KeyBanc Capital Markets Inc., Research Division
Good morning, and welcome to the Fourth Quarter and Full Year Fiscal '13 Earnings Conference Call for Hillshire Brands. [Operator Instructions] This call is being recorded. If you have any objections, you may 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.
Thanks, Candy. Good morning, everyone. Welcome to our Fiscal 2013 Earnings Call. Our fourth quarter and full year fiscal results were released at 6:30 a.m. Central Time this morning. You can find that release, along with the slides that we'll be reviewing today, posted to our website under the Investor Relations section. We expect that our 10-K will be filed with the SEC on or before August 28.
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 and for the full fiscal year. We'll also provide our outlook for fiscal 2014. We'll take your questions after management's prepared remarks conclude.
[Operator Instruction] 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. Actual results may differ from those expressed or implied in these statements. Also, during this presentation, we may refer to non-GAAP financial measures. Explanations of these 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 summarize our full year performance as I often do, I want to ground everyone in the big picture. Hillshire Brands is a focused food company with category-leading brands. We're equally committed to delivering growth and profitability. Accordingly, we believe in a very disciplined approach to brand building and innovation across our core brands. And we also believe in reducing costs in order to fuel our growth agenda. With one year of our plan complete, I feel very good about the progress we're making to build a leading food company.
In so many ways, it's been a gratifying first year. We took on an enormous amount of change, and we've made real progress on our business, our team and our culture. While we're proud of what we accomplished, we recognize it's only 1 year and we have a lot more to do. Nevertheless, we delivered very solid results in fiscal '13. Simply put, our strong businesses became stronger and our soft spots have begun to move in the right direction. Our EPS came in well above our original guidance range, but we are clear-eyed that this was driven by significant commodity deflation and onetime SG&A favorability, mostly in the first half of the year. When you strip away those unexpected tailwinds, the year came in squarely in line with our original expectations. Importantly, our brand building and innovation investments unmistakably strengthened our core brands, and our innovation program overall has been jump-started as we now have a rebuilt innovation pipeline and a much more disciplined process.
Finally, the team demonstrated a keen recognition that they need to fuel our demand drivers by delivering their cost savings targets. Not only did they deliver, they also identified new efficiency opportunities.
In the marketplace, our overall consumption trends improved meaningfully in fiscal year '13. As you can see on this slide, Jimmy Dean, Ball Park, Gallo and Aidells were standout performers. Hillshire Farm was well on its way to overall growth prior to our lunchmeat packaging challenges. More on that in a minute. But other businesses still need attention. As an example, our State Fair Corn Dog business softened late in the year amidst intensifying price-based competition. Now with our core businesses in relatively good shape compared to when we began this journey, we are well positioned to provide more attention to some of these smaller brands that have dampened our overall results.
I'm often asked, is your investment in MAP having the impact you expected? The answer in fiscal '13 was absolutely yes. Let me remind you that we historically underinvested in MAP at a rate of about 3.5%. Our goal is to get that number to 5% by fiscal '15. In this past year, we stepped up our investment to 4.4%. As you can see on the right, that increase was highly focused against a small number of businesses, most notably Jimmy Dean. And I'm pleased to report that each of these investment areas delivered very good growth. We are highly disciplined with the spend, meaning we spend where we have confidence in a return and we always look to drive more efficiency into these investments.
With respect to innovation, we took a big step forward in fiscal '13. First, we put a dedicated team in place to overhaul the innovation process and rebuild the pipeline. This team is led by our first Chief Innovation Officer. We set clear expectations that by fiscal '15, we would be generating between 13% and 15% of our annual revenue from innovations launched in the prior 3 years. We have already moved the needle here, climbing to 11% in fiscal year '13 from our past history of 9%. And the 2 products you see here are both examples of innovation success in fiscal '13. In the case of Jimmy Dean Delights, this is an example of how we're successfully strengthening our core brands. We launched several new items of Delights last year, including the flatbreads line you see here. We increased MAP over 50%, and we saw sales growth of over 30%, and what the scanner data will show you is now roughly a $150 million Delights franchise in retail sales.