Hormel Earnings: Shares Fall to Our Fair Value Estimate as Turkey Weighs on Retail Results

Hormel shares were down 9% in May 30 trading after the narrow-moat company released fiscal second-quarter results, likely due to market worries about the year-over-year decline in the retail segment. Retail sales were down 7% and segment profit was down 14% as weakness in turkey and center-store convenient meals outweighed solid performance from branded offerings. The decline in retail—Hormel's largest segment by far—overshadowed solid performance from foodservice, which saw sales increase 3% and segment profit 7%. We think this is particularly impressive given the challenges that other out-of-home dining companies have experienced, though some of it may be due to Hormel's mix of foodservice customers, which underweights restaurants.