Hormel Foods (HRL) Poised on Solid Retail Demand Amid Pandemic

With increased dine-at-home practices amid the ongoing coronavirus pandemic, consumers are resorting to keeping pantries sufficiently stacked up with food supplies. The trend is empowering several packaged and frozen food products players, including Hormel Foods Corporation HRL. The upside was well exemplified in the company’s third-quarter fiscal 2020 performance, with earnings and sales topping the Zacks Consensus Estimate. Also, sales increased year over year. Results were largely aided by strength in retail and deli businesses, which helped counter declines in foodservice.

That said, let’s take a closer look at the factors that are working in favor of the company, alongside taking a stock of the hurdles in its path.

Strong Demand is a Key Growth Catalyst

During the third quarter of fiscal 2020, Hormel Foods’ net sales of $2,381.5 million surpassed the Zacks Consensus Estimate of $2,293 million and rose about 4% year over year, while organic sales moved up around 2%. The company’s Grocery Products and Refrigerated Foods segments did well in particular. Channel-wise, U.S. retail net sales climbed 19% and U.S. deli net sales grew 4%. The company particularly gained from increased retail sales in all brands, thanks to the rising demand amid the coronavirus-led pantry-loading and stay-at-home trends. In fact, Hormel Foods continued to see market-share gains in several categories. Such favorable trends, especially strength in the retail business, are expected to be mirrored in the fourth quarter as well.

Strong Brands & E-commerce are Upsides

Hormel Foods has been gaining from its robust e-commerce offerings, including direct-to -consumer as well as online grocery pickup and delivery services. Certainly, the company’s e-commerce investments are paying off. Additionally, a strong brand portfolio has been boosting the company’s performance. Brands like Bacon 1, Fire Braised, Austin Blues, Café H, Natural Choice, Burke, Fontanini, as well as Sadler's Smokehouse (acquired recently) contributed to the company’s growth in third-quarter fiscal 2020. The company has been making strategic advertisement investments to support growth of its brands. It has also been focusing on launching products to meet consumers’ preferences. In this regard, Hormel Foods has been conducting virtual products showcases amid the coronavirus outbreak.

Wrapping Up

We note that Hormel Foods’ foodservice business has been sluggish amid the ongoing pandemic. This can be attributed to reduced demand from restaurants, hotels, distributors and various other foodservice venues. The segment is likely to remain soft in the fourth quarter as well. Apart from this, escalated supply chain costs are a concern for the company.

Nonetheless, we believe that favorable demand trends across Hormel Foods’ retail and deli food channels will continue to work in favor of the company. Moreover, its grocery and refrigerated foods segments are well placed to cater to rising consumer needs amid the pandemic. These upsides along with efficient capacity expansion and brand growth efforts are likely to help the company battle the aforementioned barriers and fuel growth. Shares of this Zacks Rank #3 (Hold) company have gained 21.9% in the past year against the industry’s decline of 2.9%.

Looking for Solid Food Stocks? Check These

The Hain Celestial Group, Inc. HAIN, with a Zacks Rank #2 (Buy), has an impressive earnings surprise record. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

General Mills, Inc. GIS, with a Zacks Rank #2 (Buy), has a robust earnings surprise record.

Lamb Weston Holdings Inc. LW also carries a Zacks Rank #2, and has a long-term earnings growth rate of 7%.

Zacks’ Single Best Pick to Double

From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.

With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.

The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain.

Click Here, See It Free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
The Hain Celestial Group, Inc. (HAIN): Free Stock Analysis Report
Hormel Foods Corporation (HRL): Free Stock Analysis Report
General Mills, Inc. (GIS): Free Stock Analysis Report
Lamb Weston Holdings Inc. (LW): Free Stock Analysis Report
To read this article on click here.
Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics


Latest Markets Videos


Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at

Learn More