Rising costs pressure Hormel Foods’ bottom line

An unexpected rise in the costs of pork, beef and nuts undermined the performance of Hormel Foods Corp. during its most recent third quarter. The company experienced positive momentum in sales and organic volumes, but the costs of such key inputs pummeled Hormel’s bottom line.

“… We anticipated upward pressure on input costs driven by (the) pork, beef and nut markets,” said Jacinth Smiley, chief financial officer, during an Aug. 28 conference call to discuss third-quarter results. “However, during the third quarter, markets worsened significantly beyond our projections.”

Specific costs highlighted by Smiley included pork bellies, which were up 30% year-over-year; the pork cutout, which was up 10%; and beef prices, which have reached near all-time highs this year.

“Collectively, we experienced approximately 400 basis points of raw material cost inflation in the third quarter alone, representing a notable increase relative to last year,” Smiley said.

To counter the rising costs, the company raised prices late in its second quarter, is implementing “targeted pricing” during the fourth quarter and is considering additional pricing actions.

“For profitability, we have announced inflation-based pricing actions related to the third-quarter markets, which we expect to partially benefit the fourth quarter and carry into the first quarter of fiscal 2026,” Smiley said. “As the fourth quarter has begun, counter to our expectations, commodity markets have remained elevated across a variety of inputs. With that, we’re assessing additional pricing actions.”