Hormel Foods Aktie

Good morning, and welcome, everyone, to the Hormel Foods conference call, where they will discuss their announced definitive agreement to acquire Brakebush Brothers, LLC. My name is Joel, and I will be your conference operator today.

[Operator Instructions]

I will now pass the call to Jess Blomberg, Director of Investor Relations. Jess, you may now begin your conference.

Good morning. Welcome to the Hormel Foods conference call regarding today's announcement of our agreement to acquire Brakebush Brothers, LLC. Earlier this morning, we issued a press release announcing the transaction. If you did not receive a copy of the release, you can find it on our website, hormelfoods.com, under the Investors section, along with supplemental slide materials.

Joining me on today's call are Jeff Ettinger, Interim Chief Executive Officer; John Ghingo, President and Chief Executive Officer-elect; and Ash Bhumbla, Chief Financial Officer. Jeff, John and Ash will discuss the strategic rationale for the acquisition, provide an overview of the transaction and review our financial expectations. We will conclude with the Q&A portion of the call, and the line will be open for questions following the prepared remarks.

Before we get started today, I'd like to reference our safe harbor statement. Some of the comments we make today will be forward-looking, and actual results may differ materially from those expressed in or implied by the statements we will be making. Please refer to today's press release and our SEC filings, which can be accessed on our website under the Investors section. Additionally, please note we may discuss certain non-GAAP financial measures this morning. Management believes that doing so provides investors with a better understanding of the company's underlying operating performance. Reconciliations of these measures, where applicable, can be found in the materials posted on our website.

With that, I'll turn the call over to Jeff.

Thank you, Jess, and good morning, everyone. Today, we are announcing an important step in the continued evolution of Hormel Foods. We have agreed to acquire Brakebush, a leading value-added chicken company with a major presence in the foodservice industry. For more than 100 years, Brakebush has earned the trust of customers through innovation, quality and strong relationships. What attracted us to Brakebush is straightforward. First, it is a highly respected company with leading positions in value-added chicken across a variety of foodservice channels. This is a $1 billion net sales business that has delivered consistent growth over time through a diverse customer base. Second, Brakebush has a talented organization. The company's team and direct sales force have been instrumental in building and maintaining the partnerships that have supported its success. Finally, Brakebush is truly a value-added company. It is not vertically integrated. Instead, they have built deep relationships with suppliers. Brakebush brings differentiated capabilities through 5 production facilities and 2 research and development labs.

Few businesses combine this level of scale, growth, operational expertise, innovation capability and customer loyalty. Beyond the strengths of the business itself, we believe there is meaningful cultural alignment between our organizations. Brakebush has been a family-owned business guided by a long-term perspective and a steadfast commitment to employees and communities. Those qualities resonate deeply at our 135-year-old company. As we look ahead, our focus is on building upon the strong foundation the Brakebush family and team have created.

With that, I will now turn the call over to John to discuss the compelling opportunities for the future.

Thank you, Jeff. I am excited about the future ahead. Brakebush is exactly the type of business we have been looking to add to our portfolio. As we've discussed throughout the past year, we have taken a number of deliberate actions to sharpen our focus and direct resources toward the businesses, categories and capabilities that we believe have the greatest long-term growth potential. This acquisition is another clear example of that strategy in action. We believe the combination of Brakebush's value-added chicken portfolio and our advantaged Hormel foodservice business creates a compelling value creation opportunity for the future of our company.

Protein remains one of the most attractive long-term opportunities in food, and chicken continues to grow in relevance with consumers and foodservice operators alike. Within that landscape, value-added chicken stands out as a sizable and growing category. We believe value-added chicken will benefit from favorable demand trends, menu innovation and operators' increasing need for convenient, high-quality solutions that make chicken preparation easy in the kitchen. Taken together, these dynamics create an attractive opportunity for sustained growth. Brakebush has built a leading position in this space through deep customer relationships, category expertise and a commitment to innovation. The company has earned the trust of operator partners by delivering solutions that help them run their businesses more effectively and better serve their guests.

Our businesses are highly complementary. Brakebush has built an outstanding position with national and regional restaurant operators, while Hormel Foods brings broad capabilities and an expansive channel presence. Together, we believe there are opportunities to broaden customer access, accelerate innovation and bring a wider range of value-added solutions to market. While the overwhelming majority of the business today resides in the food away-from-home channels, we also see clear opportunities to expand value-added chicken within our consumer branded portfolio in the retail space.

Another area of alignment is our shared commitment to staying close to customers. A towering strength of the Brakebush company is its direct sales organization and its operator-focused approach. That solutions-based philosophy closely mirrors how we have built our Hormel foodservice business over many years. Both organizations have earned the trust of operators by helping solve challenges in the kitchen, supporting menu innovation and delivering high-quality value-added protein solutions. We believe this common approach creates a compelling foundation for future growth.

I'd like to take a moment to add some perspective about our overall focus as an organization. We have announced 4 portfolio-shaping actions within the last year: Justin's whole-bird turkeys, our Brazil business, and now Brakebush. We have taken deliberate actions to remove businesses from the organization that were nonstrategic and creating complexity. And now we have agreed to acquire a company that doubles down on our advantaged foodservice business, expands our presence in the on-trend value-added chicken category and has a strong track record of execution.

One of the things we admire most about Brakebush is what the organization has already accomplished. They have built an outstanding company, a distinctive culture and a successful business model. While there are certain areas we will look to integrate, our priority will be to remain focused on driving performance behind both Hormel Foodservice and Brakebush. With that, Brakebush will operate as a subsidiary reporting through our Foodservice segment.

When I step back and look at Hormel Foods following the completion of this transaction, I see a company that is more aligned with attractive long-term growth trends, even better positioned in foodservice and participating with more scale in one of the most compelling categories in protein. We believe those advantages will drive sustainable growth and long-term value creation, and we're optimistic about the opportunities ahead.

With that, I'd like to welcome our new Chief Financial Officer, Ash Bhumbla. I'll turn the call over to him to discuss the transaction and early financial details.

Thank you, John, and good morning, everyone. I'm pleased to provide additional details on our early financial expectations for the transaction. My comments this morning will pertain only to the Brakebush acquisition. We will not be covering the fourth quarter or fiscal '27 today, rather, we'll discuss those topics on our next earnings call.

With that, as we announced this morning, we have entered into a definitive agreement to acquire Brakebush for approximately $1.055 billion in cash on a cash-free, debt-free basis and subject to customary closing adjustments. We believe this transaction represents an attractive opportunity to deploy capital in support of our long-term growth strategy. As John has highlighted, this is a strategic combination of 2 highly complementary businesses. Brakebush brings proven capabilities in value-added chicken, an attractive growth profile and strong customer relationships. Hormel Foodservice brings breadth of product offering, operating expertise and a broader operator portfolio. Together, we see a compelling opportunity to accelerate profitable growth, expand margins and generate attractive long-term returns.

For calendar year '26, Brakebush is expected to generate approximately $1.2 billion of net sales. Based on estimated adjusted EBITDA for the same period, the purchase price represents an approximately 10.7x multiple before synergies and an 8.9x multiple, including expected annual run rate cost synergies. We have identified approximately $20 million of annual run rate cost synergies, which we expect to realize by the end of fiscal '28. These opportunities are primarily concentrated in procurement and manufacturing productivity. We also see meaningful revenue opportunities from combining Hormel Foods customer relationships, food service reach and retail capabilities with Brakebush's value-added chicken portfolio, complementary direct selling organization and operating capabilities. These commercial opportunities would be incremental to the cost synergy target.

The transaction is expected to receive asset purchase treatment for U.S. federal income tax purposes. As a result, Hormel Foods expects to receive an ongoing cash tax benefit from the step-up in the tax basis of acquired assets. We expect to finance the acquisition through a combination of cash on hand and new debt. The final instrument mix, maturity profile and cost of debt will depend on market conditions at the time of issuance. We intend to maintain our strong investment-grade credit profile and preserve appropriate liquidity and financial flexibility.

At closing, we expect pro forma net debt to adjusted EBITDA to be slightly above our long-term target range of 1.5 to 2x. Supported by the cash generation of the combined company, we expect to rapidly return net leverage to our publicly stated range within fiscal '27 with the objective of progressing towards the lower end of that range thereafter. Importantly, this transaction does not change our other capital allocation priorities. We recently announced our 393rd consecutive quarterly dividend, and we remain committed to investing in the highest return growth and productivity opportunities across the business. We expect the transaction to close in the first quarter of fiscal '27, subject to regulatory approvals and customary closing conditions.

When we report fourth quarter results in early December, we plan to provide fiscal '27 guidance for the combined company, including the anticipated contribution from Brakebush. At this time, we expect the acquisition to be solidly accretive to adjusted earnings per share beginning in fiscal '28 after taking into account financing and purchase price accounting.

In summary, this transaction adds a profitable and growing business, strengthens our presence in value-added chicken and foodservice and creates identifiable opportunities for further growth and margin expansion. We're confident that this transaction offers attractive long-term financial returns and is consistent with our commitment to disciplined capital allocation. With that, we would be happy to open the lines for questions.

[Operator Instructions]

Your next question comes from the line of Rupesh Parikh with Oppenheimer.

Also congrats on the acquisition. So to start, I would love to hear more, maybe just more about the strategic rationale of the acquisition. It seems to me at least you get the nice benefit of added diversification more the more attractive foodservice business and obviously also on the chicken category. So just overall, just more color just on the strategic rationale.

Thanks for the question, Rupesh. This is Jeff Ettinger. I mean, you hit the one-two punch. It's foodservice, where we think we already have an advantaged business, and this is a great opportunity to double down in that area and it's value-added chicken. And we've been a protein-centric company for many, many years. That's a big advantage right now. But chicken has been probably the least of the proteins for us, under 5% historically with this acquisition, it will now be closer to 13%, even with turkey and beef for our portfolios. And then just the fit between the organizations. They're a direct selling organization with a strong reputation mirrors what we have with our Hormel Foodservice group. They have very complementary operator relationships, which we have very little current overlap with. And we're looking forward to being able to understand better their expanded innovation and manufacturing capabilities. They have the 5 value-added plants and the 2 R&D centers.

And then importantly, from our perspective, they don't have any harvest. That was not a part of the business we were looking to invest further in. So the value-added emphasis is important. Ultimately, we think there's a great fit between the organizations. Frankly, we're both from small Midwest towns. We're over here in Minnesota and they're in Wisconsin. A group of us will be heading over tomorrow actually to introduce ourselves more broadly to their team, and we're very excited about the transaction.

Great. And then maybe one quick follow-up question for Ash. In terms of financing acquisition, in terms of the mix of debt and cash, is that something we'll just hear more color about later next year in terms of how you guys will -- or in next year in terms of how you guys approach that?

Yes. Thanks for the question, Rupesh. We've noted that we expect to finance the acquisition through a combination of cash on hand and new debt. Our strong investment-grade credit profile does provide meaningful flexibility for us regarding the timing, maturity and structure of that financing. And so you're exactly right. I think we'll have more to say on kind of, the upcoming calls around the final financing mix and costs, which will be dependent on conditions at time of issuance. But we feel comfortable that this is the right allocation of capital for our long-term strategy and our long-term return generation.

Your next question is from Heather Jones with Heather Jones Research.

I guess I have a 2-part question. I was just wondering -- so you mentioned that you're not acquiring any slaughter facility. So wondering how you procure the raw materials? Is that on a cost-plus basis, spot basis? And then wondering -- because a lot of times, foodservice business tends to be cost pass-through. So I was just wondering if you could give us a sense of how much of this business has, like, programmatic cost pass-through mechanisms in place.

Heather, thanks for the question. So Brakebush does purchase chicken inputs. And so overall, the business is not immune to changes in chicken costs or supply availability. But the financial performance over time has been very, very consistent, and that's really because of the array of pricing mechanisms that, that business has in place. There are portions of that business that are effectively more on a long-term fixed price basis, and there are several portions that are really more in a stable margin type portfolio, whether that's cost plus or some sort of market minus. So overall, when we look at the business, it's very consistent with the value-added orientation that we see in our own core foodservice business, and we think we're in a good position to drive value there.

And then Heather, this is John. Just to add one comment to that from a commercial perspective in terms of pricing, I would say, broadly speaking, Brakebush utilizes pass-through pricing mechanisms that are similar to our Hormel Foodservice segment that we've discussed before, which helps with movements up and down in the chicken markets. The timing of those pass-through mechanisms can vary by contract, but that's the general approach.

Okay. And a follow-up is just wanted to -- I missed part of the comment on expecting accretion in fiscal '28. Is that -- did I hear you all say that's going to be adjusted for increased amortization? Or I wasn't sure if I understood that correctly.

Great question, Heather. So big picture, no. That's just an adjusted earnings basis, but not necessarily adjusted for -- specifically for amortization there. I should note, we fully expect Brakebush to contribute substantially for fiscal '27. But the first year, in particular, does reflect financing costs associated with the transaction, some of the purchase price accounting effects and limited realizations of those cost synergies. And so when we take those factors into account, we fully expect the acquisition to become solidly accretive to adjusted EPS beginning in fiscal '28.

Your next question is from Peter Galbo with Bank of America.

Ash, welcome, I guess, as hard as you tried to run away from chicken. It found you again. So there's that.

Jeff, I was wondering if you could start off. This deal is, I think, consistent with the successful deals that Hormel has done in the past from a foodservice perspective. It's a little bit larger, I think, than what you would have done historically in that segment. So maybe you could just compare and contrast it against some of the more recent foodservice deals that you all have done that you were there for, at least we're privy to on Fontanini and Sadler's, and how we might think about it in that context?

Yes. Thanks for the question, Peter. It has been about 5 years since the company's last major acquisition, and we obviously take a disciplined approach to M&A. We really saw Brakebush as the right target, the right price at the right time. It does remind us of certain past acquisitions, some of the more successful ones we've had. First, I'll start with some in the Foodservice segment, as you referenced. I mean, we had Fontanini, we've had Sadler's even before that, there was Burke. So these are brand names within the foodservice world and create or had a reputation coming in that we've been able to really build on. They're not known as consumer brands, but they're important differentiated points within the business. And they each came with new capabilities and capacity and operator-first solutions. And in each case, we were very careful to be respectful of what the team had built up. In many cases, we blended our team with their team over time. So our foodservice team definitely has a history of successfully delivering on M&A acquisition.

I also see some similarities with our Applegate acquisition. To me, when I think about that one 11 years ago, we kind of, look strategically at the category and said, hey, look, this organic natural antibiotic-free area is important. It's growing. It's not a fad. We really ought to be getting into that, but you then make sort of the build versus buy decision. And in that case, we thought we were the wrong brand. I mean, you look at a company like Applegate, they had over 150 relationships with farms and other suppliers key to that area. So it just was very much move the needle towards, hey, if we could find the right partner, that's the way we go and we did with Applegate, and we've done really wonderfully with that business, and we see Brakebush in the same light.

In terms of size, I mean, I guess, to me, I think historically, some of our better acquisitions have been in sort of the high hundreds of millions. This one perhaps to slightly over $1 billion, but I think it's in that same network, whether it's SKIPPY or Applegate, Fontanini, et cetera. So I mean, I think we're comfortable with this level. It's big enough to move the needle, but not so big that we think it adds more risk.

Okay. Great. John, I was hoping to get a little bit more color on just the overall customer mix for Brakebush. Understanding it's 90% foodservice, but if I think about the historical Hormel foodservice model, it's super diversified. It's in a lot of channels that I guess qualifies foodservice, but we may not traditionally think of. So maybe you could just help us think about the customers that Brakebush is currently serving and whether or not that has a material change in terms of your overall foodservice portfolio going forward?

Yes. Thank you, Peter. So I would say that Brakebush has a pretty diverse and really strong balance across their current business in terms of channel and customer profile. If you're thinking about strength within national and regional accounts, think about areas like restaurants, certainly some health care. There is some retail business within Brakebush today. So very, I would say, deep strong customer relationships across a number of different areas. If you then step back and look at Hormel, we obviously have a very broad set of channels and customers across -- broadly across away from home. That includes a lot of street business or independent regional business as well as strong customer relationships in some different areas, commercial and noncommercial.

And then we obviously have a very broad retail mix of customers and channels. So we see a lot of opportunity putting those pieces together in terms of the growth momentum we see for value-added chicken across away-from-home channels as well as retail channels, frankly. So we see a lot of opportunities to kind of, take advantage of the best of both in that sense. So very complementary.

Your next question is from Tom Palmer with JPMorgan.

I'll echo with the welcome, Ash. Great to meet on the phone. I wanted to maybe just first ask on the growth of this business. It's really helpful to get sales and EBITDA expectations for 2026. But if we look back, I guess, in recent years, any framing of maybe how this business has grown either top line or maybe more so from a profitability standpoint?

Tom, it's John. I'll take that question. So if you kind of, step back on this value-added chicken segment and just look at the long-term trends, we see robust demand growth. In the foodservice space, operators increasingly are looking to add more chicken to the menus. And what we see underneath that is a couple of things. One, more interest from consumers in chicken in terms of the lean protein characteristics of chicken. But certainly, there's also been a lot of menu innovation around chicken in the foodservice space. So when you look broadly across channels, we've just seen a lot of increasing demand for chicken on the menu and foodservice.

Now when you get to the operator side of that and you're looking to add more chicken on to the menu, certainly, chicken adds complexity, it takes time in the kitchen. So the desire for easy solutions in the kitchen to get high-quality chicken on the menu is a robust area of growth. And if you look back over the past 5-plus years, we've seen mid-single-digit growth for the category of value-added chicken and foodservice, and we have seen the Brakebush business outperforming that trend. So we feel very good about kind of, the sustained demand and growth profile of the business. I'll let maybe Ash comment a little bit on margins.

Absolutely. And Tom, thank you for the warm welcome. So we kind of, referenced it a little bit earlier in the call today. We've seen that Brakebush's margins have been remarkably consistent over time. And that consistency really reflects the fact that it is a true value-added business portfolio. So a lot of the profit growth has really come from that top line growth over time. For us, that really reinforces the fact that Brakebush is a true value-added business portfolio rather than a commodity [ spend for ] business. And as it's been growing, it's been able to outpace category growth. So reflecting the truly differentiated capabilities, the customer intimacy and the true on-trend value-added capabilities that they bring to the marketplace.

As we look ahead, I think we see great opportunities to continue to drive both that top line and margin expansion, particularly as we think about shifting mix within our portfolio and some of the cost synergies that we referenced in today's announcement.

Great. Also, maybe a little bit of color on how the deal kind of, came about. It does seem to be a pretty family involved business. If I -- on their website, the executive team includes a lot of Brakebushes, I think. And so maybe a little color on both how the deal came about and kind of, the managerial structure as we look at it on a go-forward basis just with that family involvement.

Sure. So this is Jeff. I'll start with that. I can start with it because I can tell you that we've had an interest in Brakebush since way back when I was here before. We literally have talked with them for over 2 decades. In a 100-year-old business, I mean, it's obviously a huge decision that they made to go the route of partnering with another company, and we're very proud that they picked us to be that partner. We've had good experience in the past with honoring the cultures of family-owned businesses. I was years ago back at JENNIE-O when we acquired the Turkey Store and the Jerome family and integrated. We ended up with people from that group and senior leadership at Hormel here at the corporate office ultimately. There are people from Fontanini still with the organization. There are people from Burke still with the organization. At Applegate, I had the chance earlier this year to go back in there and see that half of the team at Applegate was there 10 years ago. They stayed with it after Hormel. And there was folks that, oh, gee, you guys seem like you have different cultures, this could be at risk.

And so no, that to me is a huge benefit to this. The fact that we're a 135-year-old company with a foundation behind us that keeps us in a strong protected position with a very long-term orientation. We share that with the Brakebush family, and I think it will just be a great relationship going forward.

Yes. And just to build on that, I would say, from the standpoint of the go-forward approach is we love the company we're buying. That includes the culture, the talent, the people. Brakebush is a highly successful, well-run company. We believe our cultures, to Jeff's point, are highly aligned. If you think about our focus with our customers around quality, innovation, customer service, we see great alignment there, but Brakebush has a proven business model that we intend to preserve. So we talked about having Brakebush run as a subsidiary reporting into our Foodservice segment, and our intention would be to keep it moving and keep it rolling.

[Operator Instructions]

Your next question is from Ben Theurer from Barclays.

I'll just follow up as well, Ash, welcome. Good luck with chicken again. It was a good one from Pete. Now my very first question really is about, obviously, as you're having experience in the chicken business. And usually, most chicken companies are actually more on the vertically integrated side. So there's a lot of emphasis here on not being vertically integrated. Where do you see the advantages of not being integrated versus maybe some of the disadvantages as it relates to the projectability and the visibility of flows. Help us just a little bit understanding why you think there's value in being not integrated for what tends to be in the industry, a more integrated approach.

Understood. Ben, thank you for the kind welcome as well. So you've hit kind of, the key point here, which as we look at Brakebush, it is not vertically integrated, and we see that primarily as a feature and something that we're excited to be adding to our portfolio. It really allows this team to focus on further processing, product development and innovation and really insulates it from some of the volatility that we see in upstream poultry production. It's also very, very well aligned to our own value-added protein network and our own approach to offering protein solutions to the marketplace. So when we look at Brakebush and to your point, in the chicken industry, this is truly a unique asset. Opportunities to acquire scaled, nonvertically integrated value-added chicken platforms come about rarely. And so as Jeff noted, this acquisition has been on our watch list for more than 2 decades.

So I kind of, look at this ultimately as not just an opportunity to increase our exposure to chicken. It gives us a scaled operating platform in a highly attractive category. It strengthens our already differentiated foodservice business and puts us in a spot to win for years to come.

Perfect. And then just my follow-up question. I mean, obviously, it is going to be a broadening of your just exposure within foodservice, new categories, et cetera. Just wondering, there's still a little bit of retail left. What is your thought on that? Are you just going to keep that going and actually recognize it in foodservice? Is that going to be thrown over into the retail business? I mean, we're talking just about maybe $10 million of EBITDA. But I was just wondering what are your plans as it relates to the retail portion of the business that comes in?

Yes, Ben, it's John. I'll start us off on that one. So if I just step back and look at the business, to your point, it is vast majority foodservice today. The vast majority of what we see as the go-forward approach is to really run the business and drive growth and expansion through our Foodservice segment, and that will be our focus. Certainly, if you look at the channel profile of the business and compare it to some of the channel opportunities we have on Hormel Foodservice, we see a lot of opportunity and potential.

That being said, you also know we have a very broad set of customers on the retail side. There's a lot of consumer momentum for poultry and for chicken in particular, on the retail side. So we are going to look at both pieces of the business and look for expansion opportunities. But in the near term, the business will report into our Foodservice segment.

Your next question is from Pooran Sharma with Stephens.

Just wanted to start off understanding the profitability structure with a bit more granularity. I understand from your prior comments that you're pretty stable and you're seeing expansion from the top line. But as we're thinking about modeling this into our numbers, would you expect the profitability profile of Brakebush to be accretive relative to your existing foodservice EBIT margins? Or should we think of them as being dilutive? And how does that evolve as synergies are realized?

Thanks for the question. So when you look at the overall EBITDA margins of this business, while they remain solid over time, we recognize that they ultimately -- and they've ultimately been very stable, as you referenced, which reflects the value-added nature of that portfolio. They are still at a discount to our very healthy margins within our core foodservice business. So as we think about kind of, that overall portfolio, we expect that it will have an impact in terms of merging those pieces together. What we're excited about, though, is less about the margin focus and more about our ability to unlock value over time. So we've talked about the cost synergies that we're seeking to pursue, which we feel very confident in and have been conservative around our publicly stated targets.

John has also referenced how we're thinking about upgrading the mix over time. And really by putting these 2 companies together, we feel comfortable that we'll be able to get the Brakebush acquisition to a margin profile that continues to look closer and closer to our core foodservice portfolio as well.

Appreciate the color there, Ash. And I guess on that, the potential commercial opportunity, the synergy opportunity from operational and commercial, it sounds like you have little overlap. Is it fair to characterize that bucket as potentially being greater than the cost realization itself?

Yes. I mean, I would say that we are very focused on unlocking the commercial opportunities around the business. That is definitely the case. That being said, I mean, Brakebush is a company with a lot of momentum. I mean, they've demonstrated consistent growth over time, separate and apart from any involvement with Hormel Foods. So number one is keep that execution going, keep that growth profile going. Number two is we're going to learn from each other. We're going to look for opportunities to open up additional growth that neither company would have been able to access alone. So that will be something we work on together as we go forward.

And then I think on top of that, there are synergies out there. If you think about manufacturing, if you think about procurement, we do see some clear opportunities for us to get more efficient on the business as well. But that's how I would think about the structure of it.

There are no further questions at this time. I will now turn the call back over to John for closing remarks.

Well, thank you. I just wanted to take a moment to close this out. I want to thank everyone for their interest for joining this morning on this very exciting day for Hormel Foods and for the Brakebush Company, and we appreciate the interest in the story. Thank you.

This concludes today's conference call. You may now disconnect.

First of all, good afternoon, and thank you very much for joining us. Next on stage, we're pleased to introduce Hormel Foods, which is a global branded food company with over $12 billion in annual revenues across 80 countries. And joining us today are Jeff Ettinger, Interim CEO; as well as John Ghingo, the company's President and incoming CEO. So maybe let's get started.

And when you look at just the priorities for fiscal 2026, Jeff, what were the key ones that you laid at the beginning of the year? And how would you assess the progress against those priorities where we stand today almost at fiscal year-end?

So heading into fiscal 2026, we had a year in 2025 where we had driven top line sales. And so we wanted to maintain that momentum, but we weren't driving commensurate earnings growth, and that became really priority one as we headed in the last part of the planning cycle heading into the year. We focused on a few different levers that we thought could help improve that profitability. First was pricing. We have been hit with a lot of raw material cost increases during the latter half of 2025.

And sometimes it takes a little time to get the pricing through. But by early in the second quarter, we were done with that in both the Retail and Foodservice arenas. We wanted to improve mix. We wanted to improve productivity, and we are seeing enhanced margins as the year goes forward. And then one of the things we had looked at was our SG&A trend was -- it was just, frankly, growing too fast compared to what the company was growing, and we needed to remedy that.

And so we took a number of steps late in the year and executed them early in the calendar year. And indeed, as we sit here right now, we're seeing a 20 basis point improvement on the percentage of SG&A, not counting advertising against organic net sales. So that was the game plan. How are we doing against the game plan? I mean it is a dynamic environment out there. So we -- everybody, I'm sure, have been hearing about the consumer at all these different presentations, and John will talk a lot about the consumer here today as well. So that's been a challenge. We've seen challenges in the freight and logistics area. And with the Iran war and the spike in diesel costs, that's been something we've had to confront.

And then Ben, I was chatting with you, I mean, even this morning, as we get questions in our breakout sessions, people are asking, hey, a couple of the companies in your coverage universe are talking about, say, the pork cutout. And Hormel does still have pork processing plant. We used to have 3. So we're not a particularly large player in that. So our exposure is quite a bit lower. We have seen some negative margins in pork cutout. But we sell a lot of value-added products in both Retail and Foodservice. And frankly, the lower cost of goods is a benefit in those areas. So that's not really having a deleterious effect on us right now.

So all, where do we sit? We've actually been able to grow earnings this year by 6% through 3 quarters. Based on our guidance we provided for the full year, we're looking at a 6% to 10% range. So we expect to grow it again in the fourth quarter. On the top line, we did grow first and second quarter.

Third quarter, we had a miss. And so we're looking to restore that kind of growth, but we think we'll be comfortably within the 1% to 2% growth range organically for the year. So overall, I mean, our priorities were to enhance collaboration, so we reacted more quickly to different circumstances such as some of the ones I've outlined to increase our productivity and efficiency. And I think we've been able to do that mostly this year.

Okay. Perfect. And just picking up on that, and you said third quarter was a little tough and obviously, recent earnings is still fairly fresh just late August. So what were actually within the quarter, like the biggest positives, but also the biggest negatives that kind of like resulted in maybe slightly weaker soft line than at the beginning of the year? And what are your expectations as it relates to top line and bottom line for Q4?

So I'll take that one, Ben. Thank you. Yes, Q3 certainly had some moving parts. So I think it's worth walking through some of the critical ones, and then I'll touch on Q4. So starting with the positives in Q3, we continue to see very good momentum on our Foodservice business. Our Foodservice business posted its 12th consecutive quarter of top line growth. Our Foodservice business now accounts for approximately 1/3 of our company sales and approximately half of our company segment profit.

So growth on that business is particularly meaningful to the total company. We also like some of the momentum we saw in critical priority retail brands. If you look at our more poultry-based franchises in Jennie-O and Applegate, we saw nice consumption growth there. We saw growth on our Hormel Chili business in our canned center store portfolio. We saw growth on our refrigerated entrees. We had growth on our Herdez brand.

And importantly, we saw growth in the quarter in our Planters brand. So we really like some of the momentum in retail. Additionally, from a profitability standpoint in Q3, we made progress. We expanded our adjusted operating margins. We expanded and grew our adjusted EPS in the quarter. So we felt good about that progress on profitability. On the other hand, I would say top line results were more mixed in total.

And if you kind of break that down, we obviously had some near-term impacts from the portfolio shaping actions that we've been deliberate with and taking. On top of that, we saw some effects that we were expecting from an elasticity impact. As you'll recall, we took 2 rounds of retail pricing late last year and early this year. And so some of the volumes we saw come out were expected as a result of the elasticities. And then we did see a bit of softness on some of the other retail pieces beyond that as well.

So in total, if I kind of look at the quarter and then look forward to Q4, in Q4, we're going to continue to have some of that noise around the top line as a result of the portfolio shaping. But as Jeff mentioned, we are expecting to see some benefits of lower pork input costs in Q4. And I think if you just look overall, we're being appropriately cautious with how we're walking into Q4 given the consumer and operating environment.

I also think if you kind of take -- my big takeaway from the Q3 call and the reaction to the call, was I think if you look at the underlying performance of the business, the progress on the business, some of the momentum, I think it's stronger than some of the headlines and reactions to the earnings might suggest.

Now as said, Jeff, is still interim CEO, but you will be the incoming CEO. So as you prepare to become CEO, John, where do you see the greatest opportunities for the company over the next several years just with the backdrop of having been President for a while coming in, what are your priorities?

Well, let me start with where I think we are. And I would say from a Hormel perspective, we are coming from a position of strength. And I'd say that for a couple of reasons. One, I do think the protein-centric nature of our portfolio gives us a unique opportunity to really catch consumer tailwinds. And they're not short-term tailwinds. These are long-term tailwinds with some additional short-term momentum.

But I think we have a real opportunity as consumers are seeking more convenient forms of protein, seeking more affordable proteins, willing to pay a premium for certain proteins, looking for flavor-forward protein solutions. We are that partner that can provide that. All of that opportunity sits upon a foundation, which has been built over many years, strong branded portfolio. We are leading position in 40 categories.

We have away-from-home channel coverage through our Foodservice business that allows us to be that partner for the consumer whenever and wherever they're looking for that next protein occasion, whether it be in the morning, afternoon, dinner, snacking, anywhere in between, wherever they are, we can be there. So that's a great foundation with this protein-centric opportunity sitting on top of it.

Now for my focus going forward is how do we unlock more value from that opportunity. So a couple of things I'll call out that will continue to be really important focus areas for me and for the company.

One will be innovation and renovation. We need to continue to enhance our portfolio to work really closely listening to consumers about how their protein needs are evolving, working with our operator partners in the Foodservice space to make sure we're understanding how do we uniquely solve problems for both consumers and operators. That's one.

Two, we need to continue to invest in data, analytics, technology and strengthen our capabilities as a company, modernize ourselves. So we'll continue to do that work. And third is just a relentless focus on strengthening execution. We need to continue to execute, execute, execute and execute well. So those are some of my focus areas.

But if I pull back from all of that, I think we do have a unique pot. I think it is about investing in those areas to continue to get the growth out of the business. And I do feel like we have a good runway to consistent growth.

Okay. Perfect. Jeff, maybe if you could help us in contrast the current environment we're in with the industry dynamics when you were CEO previously a couple of years ago.

I'll be happy to. I see this is your 19th conference. I think I was here at the beginning. So I was the CEO of Hormel Foods from 2006 to 2016. Clearly, that was an era where growth was more readily accessible for a lot of the players in the industry. We did feel like we had the team and the strategy and the portfolio and the execution shops to do better than many companies during that time frame. So as I look at the environment now, clearly, okay, it's not -- there isn't growth everywhere at this stage in the food industry.

But I guess I don't really have a wise attitude toward that. I mean we are in food. It's like people still eat 3 meals a day at least, 4 or 5 if you throw in snacks that are more and more prevalent. I was recently down at one of our major customers' headquarters and hearing about their goals and their goal is to double the meals they're involved with. And to me, that's the right focus. It's really less about calories or pounds. It's more about being relevant to people in those kind of forms.

And so I think the portfolio going forward is really well positioned to take advantage of that. We have the protein centricity that John referenced. We have the solutions-based heritage that our Foodservice group, which has grown 12 quarters in a row now, even in environments where the total industry is not necessarily growing at that clip. They've been able to do that.

And I think as John and the team get the retail brands focused and the international markets focused, you're going to see that throughout the portfolio. So I think you have the opportunity as investors to invest in John and his team going forward as an entity that I think is going to do better than most in the marketplace going forward.

Okay. You mentioned Foodservice and the strength there. Clearly, it's been very consistent source of growth, and you said the share of it half of profits. What does that performance actually say about the strength of the business? And where do you see incremental opportunities within Foodservice?

Yes. So I think if you step back and look at our Foodservice performance over time, we have proven the business model we have to be very unique and durable to grow even in down markets when industry challenges persist. What's underneath that to get to that part of it, I think 3 things that I'd point to. One is our value-added portfolio and the innovation we continue to bring to that portfolio.

We need to continue to create more value. And as we do that, we continue to do that, we're solving more problems for the operator. So our portfolio is key. Two, our direct sales force. Our direct sales force is truly a unique engine of culture, talent, capability and the work they do with our operator partners is critical. And then third is we have a very diversified channel base across our Foodservice business. So whether you're talking commercial, noncommercial, independents, chains, geographic diversity, channel diversity.

So that gives us the opportunity to play different channels where we see pockets of growth and pockets of opportunity to keep the growth engine going. Now what does that look like? If you take a moment in time where our Foodservice operator partners are really challenged, menu inflation, difficulty in obtaining labor and skilled labor in the kitchens, you look at problems around shifting demand from their consumer base, inflation, right, all of those factors, how can we help? And so because we have this direct sales force, I like to call our direct sales force more than salespeople. They're gathering insights.

They're building relationships. They're being creative in solving problems in the kitchen with the operator partners and they're bringing back solutions. And so when you're doing that, even in a challenged environment, you can grow the top line because those operators will gravitate to the partner who's solving the problems they're dealing with. And so an example of that would be our FLASH 180 Chicken platform. If you look at the demand space in Foodservice around breaded chicken, it's one of the fastest-growing areas.

Consumers, diners want more breaded chicken, whether it be chicken tenders, whether it be fried chicken sandwiches. But if you're an operator in your kitchen, you want to sell more chicken, it gets difficult. You're bringing raw chicken, takes time, you have to handle it. You have to batter bread in the fryer, 10, 12 minutes. So we're bringing through our FLASH 180 Chicken platform, 180 seconds from package to plate, pre-prepped. So it's super simple to execute, saves time, saves space in the fryer. So that's an example of the solution.

Another quick one I'll give you, Ben, is because this is such an important part of our business is our branded pepperoni business. Pizza operators are struggling right now, competing for traffic, also dealing with inflation. Our branded pepperoni business has grown really nicely this year as part of our Foodservice growth. Why?

Well, one of the reasons is we're bringing those pizza operators menu news through our Rosa Grande premium pepperoni line. We're bringing it through our new Calabrian, which are spicy pizza toppings.

News, a way for them to differentiate, bring something to their diners, compete for some of that traffic, sell some more pizza. So that's the mindset we bring is how do we help -- and through that help, we actually continue to drive consistent growth, and we're confident we can continue to drive growth in our Foodservice business. There's a world of opportunities in terms of channels and product platforms.

Okay. So maybe leaving Foodservice behind and talking a little bit about retail, which obviously is large-term sales, but not as large. There's clearly, you've mentioned the dynamic environment, but there are some areas of better growth. So what's maybe first working particularly well? And then second, where are the more challenges?

So I would say from a retail perspective, we've done a lot of work over the past year on reframing our portfolio and our opportunity really around the consumer. So what does the consumer want? Where is the consumer headed? So I start with that headline because I think that headline is working for us in total, and I'll give you a few examples. Consumers continue to seek better-for-you versions of proteins.

So if you look at our business in the third quarter, Applegate and Jennie-O are more poultry-driven franchises, both performed well, both posted growth in the quarter, meeting those needs for convenient forms of lean protein that consumers are looking for. Second example is in this moment, consumers continue to look for value and versatility. What are the things I can put in my pantry and my refrigerator that will stretch a meal that I can use in different ways that I'm going to get value from.

There, we saw our canned portfolio, including chili, Hormel Chili, but also Dinty Moore stew, MARY KITCHEN hash. That portfolio grew in the third quarter as consumers reach for those options. We also our refrigerated entrees business. That's sort of the ultra-easy plug-in. We call that heat and eat. I mean you bring it home, you pop it in the microwave, you heat it up and it's ready to go. That business grew because it was meeting that need for time saving and convenience and value.

And then you go beyond that, and consumers continue to want great quality food, but they want the prep and the kitchen to be really easy. So another example of that is bacon. So we had growth on our bacon business through convenience bacon. Our convenient bacon formats are microwave-ready bacon, pre-portioned bacon, oven-ready bacon that's sold on a disposable tray. Those formats are working for the consumer.

They're driving growth in the category. They're helping us gain share of the overall bacon category, but they're meeting that need for convenience for consumers. And the last one I'll bring up is just the behavior around snacking is changing.

Consumers continue to migrate towards snacks that are more substantial, that are more satiating, where you have a mini meal, a fuel dose and you move on as opposed to what I would refer to as mindless munching or typical grazing behavior.

And so with that, we're positioning our brands, notably Planters into that big substantial snacking space. And we actually saw a great proof point of what's working in our Planters business in the third quarter where we grew sales volume, market share, household penetration and really started to penetrate this bigger world of substantial snacking behind planters.

So we have a lot of spots that really support that overall consumer story. That's the common thread that runs through there is where we're getting that consumer equation right. We're accelerating our efforts in our growth.

Following up on the challenges.

So what I would say about the challenges, let me call them opportunities. Not to be cute, but I genuinely do think our priority retail businesses are all opportunities. I'll tell you why. We are not sitting on a portfolio of products where we're trying to find a consumer problem to solve, to have them be relevant. We actually have plenty of consumer solutions opportunities to go after with our portfolio.

And so when we think about consumers looking for shortcuts in the kitchen for breakfast, lunch, dinner, for portable protein snacks, for portable protein fuel in the morning, we have a portfolio that meets those needs, right? We can -- we have that opportunity. Now that being said, we are doing some very important work right now. We're doing the important work of positioning, reframing our brands, modernizing our brands.

Some of the brands are further along than others. And so where you see some of the momentum, generally, it's where we're further along in that journey. The second piece of important work that we're doing on our business is investing in capabilities that are critical to win in the marketplace. So here, think about things like revenue growth management, including price pack architecture, e-commerce, digital communications, and innovation.

Under the leadership of our new Chief Marketing Officer, we are building those capabilities aggressively. That's going to help lift all of the brands over time. In some of the lead priority brands, we've leaned in more. We're starting to see some of the success come from that. So that is important. And that's why I say when I step back from all of it, I truly do think of our priority brands in retail as a series of opportunities, and we're going after them aggressively.

Got it. So one of the things that comes along with it, and you started about this, is just the general portfolio shaping and some of the divestments we've seen. So you've taken some meaningful steps in the past to make adjustments. Now what has been common threat, what has been like the idea behind those decisions first?

And then for some of the more meaningful shifts in the portfolio, for example, Turkey, some stuff in the international segment. But how should investors think about those businesses going forward? Like what's the key of Turkey, how to think about international, maybe for you, Jeff.

Okay. Thank you, Ben. So John and I moved into the roles of Interim CEO and President in mid-July of last year and have operated really as partners ever since. And one of the key things we sat down and talked about early on was, okay, we're kind of both here this year. Let's take advantage of this and look at our portfolio and be more proactive about areas where we think, hey, look, this really isn't as good a strategic fit.

We maybe have known that for a while, but we just hadn't -- you got to find the right buyer, et cetera. And so we launched that effort and ultimately, during the course of the year here, have sold a half interest 51% interest in the Justin's brand. We got out of the whole bird part of the Jennie-O franchise, and then we sold CERATTI, a brand that was based out in Brazil. So all told for next year, as you're heading into 2027, that's about $300 million in sales that will get rebates then. A much smaller impact on profitability.

That's one of the reasons we kind of chose that these maybe weren't the businesses we should stay in. They tended to be lower margin. They tended to be lower growth. They were maybe quite volatile, or maybe, we just really weren't bringing that much to the party here. So I'll walk you through kind of the thinking behind each of those. In the case of Justin's, when we first acquired Justin's, it was primarily a nut butter, almond nut butter franchise, so kind of a new age version that complemented nicely with SKIPPY.

But over time, actually, that business has migrated and is much stronger in the confection area. So peanut butter cups and other types of items, which is not our supply chain, is not our background. And so we were able to find a partner that is really much more geared toward that. We've retained a 49% interest, but they're off and running it and off to a good start with that.

On the turkey side, I mean, we still love Turkey. We still own the majority of both the raw material assets and the finished product branded items that we had before. But the whole bird part of the Turkey portfolio really had been declining, not particularly value-added, quite volatile, most of the time, low earnings. Every once in a while, you'd have a great year and then you'd be up against that year next year.

And so it just really kind of didn't fit in terms of where our priorities were. We were able to find a great local partner that we had a lot of background and experience within that industry to acquire our Melrose plant and to take over that part of the business. But we retained 5 other turkey plants, farms, feed mills, et cetera, within that operation. And more importantly, we're still growing the value-added Jennie-O turkey items through the Retail and Foodservice segments.

Then when it comes to Brazil and the CERATTI franchise, that was a brand we acquired maybe 10 years ago. I think the goal at the time was, oh, maybe we can replicate some of the success we've had in Asia Pacific and Latin America, and this was going to be the first of other things in Brazil or the first of other things in Latin America, and it just never really came to fruition that way.

And so 10 years later, it's sort of this one-up brand, very subscale in a challenging market. And so again, better owner going forward than us owning it. So all told, I mean, what's really important to us is kind of clearing the decks and being in a position where we can put our time, resources, focus on things that can grow and opportunities that we think we bring more to the party.

Where we stand today, is that it? Or should investors expect additional portfolio optimization?

I mean the way I would think about that is it is an ongoing discipline is how we're approaching it. It will be a part of our strategic planning process is to continually evaluate our portfolio. That being said, to Jeff's point, the pace has been pretty aggressive at this point in terms of making some of these deals happen, which has been good. So I can't predict the pace, but I will say the discipline will be there.

The other thing I would say is it's not a one-way street. So we've been looking at exiting businesses, divesting businesses, selling controlling interest. But we certainly continue to also look at what could be enhancing to bring into the company through M&A. And if you look at us as the consumer company that wins with protein, part of that will be guided by where is the market moving now and into the future for both consumer needs around protein as well as our operator needs on the Foodservice side.

What are the things the operators are struggling with to get more protein on their menus that we can help with? And what are the things the consumer is going to be looking for into the future.

So as we think about things that could potentially be additive to our company that would add capability that would strengthen our portfolio, that would improve our trajectory on growth, those are things we certainly would look at. So we will continue to look at where things don't fit. We'll continue to look at what things might fit that we could add to the portfolio. And we'll do all of that with an eye toward maintaining very disciplined capital allocation.

Okay. Got it. And then I mean, I'm not going to go into guidance by all its means. But if you take a look at like the long-term growth algorithm, and you've talked about this in various Capital Markets Days in the past, and you've mentioned earlier on the top line being a little bit on the softer side, 3Q, probably 4Q. What makes you feel good about the trajectory of the business as you just look ahead into fiscal 2027 as it relates to the algorithm of top to bottom line growth?

I can give you some thoughts on that. So without venturing into formal guidance, we'll get there in a few months when we close out our year. I do feel confident about a few things that I see happening on the business right now and in the company. So I could touch on those. I mean the first one is we can start to see tangible evidence now that the strategic actions and decisions we've been taking are working. 9 months through the year, we've grown organic net sales. We've expanded adjusted operating margins.

We've increased adjusted EPS. These are tangible signs that the business is moving in the right direction and the actions we're taking are working. So that, to me, gives me some confidence. Two, where we're seeing good momentum around the business are on critical areas that are part of our growth algorithm and our long-term growth objectives. So Foodservice continuing to put up strong growth is very important. Number one, it's a big part of our growth plot going forward, not surprisingly.

But number two, it's mix favorable for us as a company where we can drive that growth. We're seeing good growth and momentum on a number of our priority retail businesses where we've leaned into capabilities and consumer positioning.

So seeing that momentum is helpful as well. And then the third thing I would point to, and this is a little bit more of what I see inside the company, but a lot of the actions we've been talking about over the past couple of years, if you think about things like bigger emphasis on brand building and brand positioning, if you think about things like supply chain planning, end-to-end supply chain planning, capabilities we've been building around planning and new technology and planning.

If you think about things like an increased focus on analytics, portfolio shaping, all of these things we are starting to see truly embedded in the business. They're becoming just a part of how we operate. We continue to up our game in terms of developing sharp strategy, sharpening our portfolio, being very precise about what capabilities we need to invest in and then focusing on disciplined execution and forecasting of our business.

And I'm starting to see all of those things more and more embedded into the teams and how we work with discipline, with process. And so that gives me confidence looking forward as well. So I put those pieces together to say, I think as a company, we're in a really unique spot with a unique opportunity to continue to drive top and bottom line growth into the future. And that gives me optimism.

Before coming to closing, you've talked about it early on, obviously, the whole commodity benefits that you might be seeing. So maybe remind us real quick how we should think about the commodity cost piece, but then also pricing mechanisms and pricing dynamics for both Foodservice and Retail.

Yes. I mean I can comment on that briefly because this is one of the points of our business that sometimes does get overlooked or maybe just not quite understood enough. But certainly, our top line -- in addition to obviously the cost impacts of commodities, there are large portions of our business where our top line does move with commodities moving up and down.

Our Foodservice business, a lot of our Foodservice business is that way. Some of our Retail business is, but a lot of our Foodservice businesses, meaning when commodities are coming down, we will see a deflationary impact. So we might see a business decline on the top line sales line or grow slower than it otherwise would have absent the decline in commodity pricing.

And so you could have a perfectly healthy business underneath that, that's growing just the way it was, but the growth in terms of net sales looks suppressed based on deflationary commodity market. So I do think that's worth pausing on because there is always some of that aspect of our business, and it's just worth pausing on for a minute.

Okay. Got it. All right. So if we should take one message away and maybe, Jeff, it's probably your last time we're going to be here on stage, probably. What would you want it to be? I'll let you go first, and then I'll let John close it out.

I mean I really look at Hormel Foods now, circa 2026 and especially comparing it to when John and I moved into these roles. I feel like the company is more focused. I think it's definitely more profitable, and we can show that in the numbers. And I think we're more resilient. I mean it's not an easy environment out there, but I think our team has reacted well to challenges, and we'll continue to do that going forward.

I don't want to take the last word from Jeff, but I will. Just to make a couple of additional points because I agree with everything he said. But yes, for me, we are a unique company. We have a very unique portfolio. We've implemented a bunch of actions and decisions across the business from portfolio shaping, capability building.

And we've actually built what I consider to be a best-in-class leadership team with some outside hires this year we brought into the company, coupled with some really deep seasoned excellent leaders who are long tenured at Hormel. The results of those actions are just starting to pay off now.

So we are starting to see progress, but there's a lot more progress to come. And so that, to me, is kind of my closing thought is more to come, but a lot of the actions we have underway are starting to take hold.

All right. Jeff, John, thank you very much. There won't be a breakout session, so thank you very much for attending today. And yes, on to the next one. Thank you very much.

Thank you.

Very appreciated.

Hello, everyone. Thank you for joining us, and welcome to the Hormel Foods Corporation Third Quarter Earnings Call.

[Operator Instructions]

I will now hand the conference over to Jess Blomberg, Director of Investor Relations. Please go ahead.

Good morning. Welcome to the Hormel Foods conference call for the third quarter of fiscal 2026. We released results this morning before the market opened. If you did not receive a copy of the release, you can find it on our website, hormelfoods.com under the Investors section, along with supplemental slide materials. On our call today is Jeff Ettinger, Interim Chief Executive Officer; John Ghingo, President and Chief Executive Officer Elect; and Paul Kuehneman, Interim Chief Financial Officer and Controller. Jeff, John and Paul will review the company's fiscal 2026 third quarter results and provide a perspective on the remainder of the year. We will conclude with the Q&A portion of the call.

[Operator Instructions]

At the conclusion of this morning's call, A webcast replay will be posted to the Investors section of our website and archived for 1 year. Before we get started this morning, I'd like to reference our safe harbor statement. Some of the comments we make today will be forward-looking and actual results may differ materially from those expressed in or implied by the statements we will be making. Please refer to our most recent annual report on Form 10-K and quarterly reports on Form 10-Q, which can be accessed on our website under the Investors section. Additionally, please note, we will be discussing certain non-GAAP financial measures this morning.

Management believes that doing so provides investors with a better understanding of the company's underlying operating performance. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Further information about our non-GAAP financial measures, including comparability items and reconciliations are detailed in our press release, which can be accessed on our website. I'll turn the call over to Jeff Ettinger.

Thank you, Jess, and good morning, everyone. Earlier this year, I outlined priorities for Hormel Foods that could be summarized into 3 areas: strengthen execution, realize the benefits of the actions we had taken to improve profitability, and foster greater collaboration across the enterprise. As we review the third quarter results today, I am pleased by the progress we have made against each of these priorities. I would characterize Q3 as a solid quarter, though admittedly not as strong as Q2. Our team remains focused on delivering profitable growth and that focus contributed to another quarter of earnings growth as adjusted earnings per share increased 6% versus last year.

On the top line, results were more mixed. Organic net sales declined with much of the pressure coming from deliberate portfolio shaping actions, reduced commodity markets and a still pressured consumer environment. At the same time, we continue to see positive momentum across many of the more strategic parts of our portfolio. Importantly, these results build upon strong year-to-date performance. Through the first 9 months of the fiscal year, we have increased organic net sales, delivered strong adjusted earnings growth and strengthened the underlying fundamentals of the business. Our year-to-date results combined with our expectations for the fourth quarter, give us the confidence to raise and narrow our fiscal 2026 adjusted earnings outlook to a new range of $1.45 to $1.51 compared to our prior range of $1.43 to $1.51.

We remain confident in delivering fiscal 2026 adjusted earnings growth consistent with or above our long-term algorithm. We have also tightened our full year organic net sales growth expectation to 1% to 2% from our prior range of 1% to 4%, better reflecting current market and consumer conditions. Before I conclude my remarks, I want to take a moment to recognize and congratulate John Ghingo on his appointment as the next Chief Executive Officer of Hormel Foods. Over the last year, John and I have developed a strong partnership. We've had the opportunity to work side by side on virtually every significant matter facing the company. Together, alongside our leadership team, we have shaped our operational priorities, investment decisions, portfolio strategy and long-term growth plans. Building upon his background of more than 25 years of leadership across the consumer packaged goods industry including 6 years in 3 important roles at Hormel Foods, John is more than ready for his new role. I have a deep appreciation for his commitment to our people, customers, shareholders and the communities where we operate. I'm very confident that Hormel Foods is well positioned for its exciting next chapter under John's leadership.

I would also like to take a moment to thank our investors and the broader investment community for your engagement, feedback and support over the last year. While this is my last earnings call, I am looking forward to spending time on the road meeting with many of you over the next couple of months. It has been both a privilege and a rewarding experience to serve the company this past year. With that, I will turn the call over to John to discuss the quarter in more detail and share his perspective on the opportunities ahead.

Thank you. Before I discuss the quarter, I want to thank Jeff for his leadership and partnership over the past year. I've benefited tremendously from his counsel, experience and commitment to Hormel Foods as we work together to navigate a period of change while positioning the company for the future. Jeff's impact on Hormel extends far beyond the past year, and we're fortunate that we'll continue to benefit from his perspective and leadership as a member of our Board of Directors. While this is Jeff's final earnings call as interim CEO, I look forward to continuing our engagement with investors, customers and employees as we finish out the fiscal year. I am honored to lead Hormel Foods as its next Chief Executive Officer. This is a company with a rich history of protein innovation, a distinctive culture and an incredibly talented team. I've spent considerable time evaluating our business through a clear lens, where we are winning, where we need to improve and which capabilities matter most to creating long-term value.

What gives me confidence is that the fundamental strength of Hormel Foods remain firmly in place. We have a portfolio of beloved brands, strong positions in attractive categories a differentiated foodservice business, a strategic international footprint and a balance sheet that provides flexibility. At the same time, we have identified opportunities to improve execution simplify portions of our business and sharpen our allocation of resources toward higher potential growth opportunities. The work we're doing today is designed to build a stronger Hormel Foods over the long term. With that context, let me begin with our third quarter results. While there were several moving pieces during the quarter, we remained focused on disciplined execution and delivered adjusted earnings growth. Net sales declined modestly reflecting portfolio shaping actions, softer commodity markets and a challenged consumer environment, while adjusted operating margins improved versus the prior year.

Let's walk through the key drivers of results for each of our segments starting with foodservice. In Q3, we delivered our 12th consecutive quarter of organic net sales growth, continuing to outperform in an industry facing softer traffic trends and ongoing macro pressure. Our growth remained broad-based across channels, customers and product platforms, reflecting the durability of our portfolio and the strength of our category positions. Premium prepared proteins and branded pepperoni were particularly strong contributors during the quarter, reflecting our ability to align with operator demand for differentiated value-added solutions.

Importantly, our top line results were achieved despite the impact of lower commodity-based pricing in portions of the business. Foodservice profit growth once again outpaced sales performance, driving another quarter of margin expansion. This reflects our disciplined focus on mix management and profitability. Foodservice segment continues to benefit from the power of our operator-focused model and our direct sales organization, both of which allow us to identify emerging trends, solve real customer challenges and capture opportunities.

Foodservice remains a key driver for the company and an important contributor to both top line momentum and earnings performance. In retail, as I mentioned last quarter, we expected a noisier top line in the back half of the year. The divestiture of our whole bird turkey business and the exit from certain private label snack nut products weighed on year-over-year net sales comparisons.

These actions, along with pricing elasticities and a challenging consumer environment also affected volume during the quarter. While many of these factors were anticipated, the impact on volume was somewhat greater than we originally expected. These dynamics affected our short-term performance, but they reinforce the importance of the long-term actions we are taking to improve the quality of our business and focus our resources on higher growth, higher-margin opportunities. Importantly, the work we are doing to strengthen our protein-centric offerings is translating into marketplace momentum for our priority brands with several delivering net sales growth in the quarter and continuing to gain traction with consumers.

Sales of Jennie-O ground Turkey and the Applegate portfolio grew this quarter, benefiting from sustained demand for protein-rich offerings. Hormel Chili and our refrigerated entrees also delivered dollar sales growth, reflecting consumers' desire for convenient, versatile and flavor forward meal solutions. Planters also delivered a strong quarter, fueled by impactful in-store activations and continued investment behind the brand. Offerings such as the limited time flavor displays for America 250 enhanced visibility, drove consumer engagement and reinforce Planters leadership in the category. At the same time, we continue to advance our focus on e-commerce and digital media. While still early, the results are encouraging and reinforce our confidence in this iconic brand. Across retail, we continue to shift a greater share of our marketing investment towards retailer media and digital channels, enabling more targeted, relevant and measurable consumer engagement.

This evolution will continue through the fourth quarter as we further strengthen our capabilities. Over time, we expect these efforts will improve the effectiveness and efficiency of our market investments, allowing us to allocate more resources toward higher-return brand-building activities.

Shifting now to international. While the quarter was impacted by some unique items that Paul will cover in more detail, our long-term opportunity remains highly compelling. We continue to focus our efforts on the markets and opportunities with the strongest long-term growth potential. During the quarter, we took important steps to advance that strategy.

First, we made the decision to divest our Brazil operations as this proved to be a subscale business in a challenging market. This divestiture allows us to further sharpen our portfolio focus to the Asia Pacific region.

Given the significant opportunities in this region, we also relocated our Group Vice President of International, Swen Neufeldt, to Singapore. Positioning Swen in the region allows him to be more closely connected to our teams, customers and partners enabling faster decision-making, deeper market engagement and stronger execution as we pursue our growth ambitions across the region.

Turning now to our enterprise supply chain. We remain focused on strengthening execution and improving how we serve our customers. During the quarter, we experienced incremental costs related to our planned inventory reversing actions, lower production volumes and certain operating challenges. In addition, the broader logistics environment remained pressured. These short-term impact should not overshadow the progress we are making to develop our supply chain capabilities for the long term. We continue to advance Hormel production systems in our facilities enhanced visibility through better data and planning tools and improved coordination across our network.

More broadly, I'm encouraged by the progress we're seeing across the business. Through the first 9 months of the year, Organic net sales increased 1%. We grew adjusted operating margins 30 basis points and adjusted earnings per share increased 6%, providing tangible evidence that our priorities are clear and our strategy is working. No single quarter has been easy, but we have remained committed to delivering our objectives and positioning the business for the future. We're sharpening our portfolio, investing behind our strongest brands and growth platforms simplifying how we operate and strengthening the capabilities that will help drive sustainable long-term growth.

As we plan for the next fiscal year, we remain optimistic. We are focused on delivering balanced growth expanding profitability and generating strong cash flow. We operate in attractive categories centered around protein, and we believe we have what it takes to win in our space. As the changes we've made over the past year become embedded in the business, we believe Hormel Foods is increasingly well positioned to deliver growth and profitability consistent with our long-term objectives.

Before I turn the call over to Paul, I want to briefly acknowledge the leadership announcement we shared this week. We are excited to welcome Ash Bumble to Hormel Foods as our next Chief Financial Officer. Ash brings extensive finance, operations and transformation experience, and I am confident he will be a strong addition to our leadership team, as we continue to strengthen and modernize the business. I also want to thank Paul for his outstanding leadership over the past year as Interim Chief Financial Officer.

Paul has been a trusted partner to Jeff, myself and our broader team during an important period for the company. His financial expertise, deep understanding of Hormel Foods and commitment to our people have made a meaningful impact across the organization. We are grateful for his many contributions and look forward to his continued leadership within our finance organization. With that, I'll turn the call over to Paul.

Thank you, John, and good morning, everyone. Before discussing our overall results, I'd like to provide some additional context on our International segment as several items affected our results during the quarter. First, we announced the definitive agreement to sell our operations in Brazil. As a result, we recognized a loss during the quarter, which was [indiscernible] at the corporate level. The transaction closed early in the fourth quarter. As such, Brazil's operating results will be excluded from our organic volume and net sales comparisons going forward.

Second, we recorded an impairment related to a minority investment in Indonesia, which was reflected in equity and earnings. Third, the underlying demand for our branded export products remained resilient, but the recognition of certain SPAM export sales was adversely impacted due to a onetime legal entity transition. Strategically, we believe that the creation of this structure puts us in a more advantageous position to serve our global consumers.

While these items affected our third quarter reported results, they do not change our view of the underlying fundamentals or long-term growth potential for our International segment.

With that context, let me turn to our overall quarterly performance. Third quarter organic net sales declined 2% compared to the prior year. Third quarter organic net sales declined 2% compared to the prior year. As Jeff and John discussed, portfolio shaping actions, softer commodity markets and the consumer environment were the primary drivers of the decline. Gross profit was $472 million in the quarter, and gross margin was 15.9%. Lower volumes and some operational inefficiencies negatively impacted margin improvement for the quarter, but we believe that we remain on track for improving margins over time.

I'll unpack a few of the drivers behind that belief. First, on cost of goods sold, over the long term, lower commodity prices help our margin profile. On a short-term basis, however, the benefits of lower input costs can take some time to be realized as we work through our inventory position. In the third quarter, we started to recognize the benefit of lower pork prices in our P&L, but given the timing of the cost recognition, we expect a greater portion of the benefits to be realized in future quarters.

For beef inputs, prices remained elevated during the quarter relative to the prior year. Elsewhere in cost of goods, several of the factors we highlighted last quarter developed largely as expected. Freight and logistics costs remained elevated during the quarter. Fuel prices moderated temporarily but subsequently returned to higher levels. Overall, our view of the logistics environment remains largely unchanged from our prior commentary. The inventory rebalancing actions we previously shared progressed in the third quarter, and we saw cost pressure due to the intentional lower plant utilization. Our new integrated business planning process brought visibility to this opportunity and we believe it will support a more efficient operating model going forward. SG&A as a percentage of net sales was up in the third quarter. In addition to some of the onetime items previously mentioned, we recognized a litigation settlement during the quarter.

On an adjusted basis, SG&A as a percentage of net sales improved compared to last year, with the primary drivers being lower employee-related expenses and the timing of our marketing and advertising investments. Cost discipline remains a key focus for the business, and we will continue to select the highest return investments for our SG&A spending. Adjusted equity and earnings was comparable to the prior year. Given these factors, adjusted operating margin was 9%, up 60 basis points versus prior year. Other income was unfavorable compared to prior year with investment returns on the Rabbi Trust as the primary year-over-year driver. Taken together, adjusted earnings per share was $0.37, up 6% versus last year.

Shifting to cash flow and capital deployment, we generated $241 million of operating cash flow in the quarter, up 54% a year ago, primarily reflecting improved inventory management and working capital performance. Capital expenditures were $68 million we invested in infrastructure improvements, along with data and technology to support long-term growth. We returned $161 million to stockholders in the quarter through dividends, fully aligned with our capital allocation framework. We remain committed to the dividend and are proud to have reached our 392nd consecutive quarterly payout.

We ended the quarter in a sound financial position with ample liquidity and a conservative balance sheet. Cash on hand totaled $840 million, up $159 million since the end of fiscal 2025. This gives us flexibility to continue investing in the business while returning capital to shareholders.

Let's take a moment to review our updated guidance for fiscal 2026. We expect fiscal 2026 net sales to be in the range of $12.1 billion to $12.2 billion, which represents organic growth of 1% to 2%. We narrowed and raised our full year adjusted operating income and adjusted earnings per share guidance, which now represents growth of 6% to 10% year-over-year. I'll close with a few thoughts on our progress this year. Through 3 quarters, we navigated both anticipated and new external challenges while continuing to execute against the priorities we established at the beginning of the year. Our results to date, combined with improved visibility into the fourth quarter support our confidence in delivering our updated full year outlook.

At this time, I'll turn the call over to the operator, and we'll open it up for Q&A.

[Operator Instructions]

Our first question from the line of Ben Theurer with Barclays.

Jeff, John, Paul, thank you very much for your comments early on. So my first question really is picking up on the guidance. If you could help us unpack maybe the drivers of: a, the top line guidance revision? And then within that also, what, on the other hand, do you think is going to improve as we go down the income statement as you're up -- revising up your adjusted profit outlook and EPS outlook with the [indiscernible] the higher end of the guidance? So that would be my first question.

Yes. Thank you, Ben. This is Jeff. I'll go ahead and take the question. Sure. We're going to share our thoughts about guidance. On the top line, given our year-to-date performance of plus 1% and our outlook for the fourth quarter, we think an organic net sales range of 1% to 2% is appropriate. John covered some of the current trends in his remarks, but he'll be happy to answer other questions about the top line drivers and a follow-up. I'm going to focus more on the bottom line. So on the bottom line, when we spoke to all of you after Q2, our outlook for Q4 was frankly approximately $0.40. Our updated assessment has $0.40 for Q4 now at the high end with more like $0.37 at the midpoint. What has changed? Well for one thing, volumes. As John and Paul noted, we are experiencing some weakness in sales volumes for certain retail franchises. When this happens, we lose out on both the sales margin contribution and on the plant throughputs associated with better volumes. And even though we are seeing a better COGS environment, we don't take full advantage of it when volumes are off. This is an area that could have some upside still for the quarter if we were able to improve volumes. Our sales teams are actively focused on this, and they will have their efforts supplemented by enhanced advertising during the quarter.

Another item is freight, including fuel costs. We have been dealing with it as transitory as tied to geopolitical issues, and it still may prove to be transitory. But for now, fuel costs have returned to higher levels. If they trend lower during the quarter, this also would be a benefit. We set out the year focused on improving adjusted EPS, and we are doing just that. Our new growth range remains at or above algorithm at plus 6% to plus 10% for the year.

Overall, we think our revised ranges are realistic, achievable and sensible, and they represent a strong fiscal 2026 as we close out the year.

Okay. Perfect. And then for my follow-up. Obviously, in retail, we saw rather significant volume decline. Can you maybe help us unpack that as well a little bit and maybe talk about a little bit more on the core brands, the bigger ones. How they have been performing and what's been actually driving within retail high single-digit volume decline.

Yes, sure. This is John. Ben, I'll take that question. So yes, I would say retail had a mixed quarter after a relatively stronger second quarter. And to your question, I'll start with the top line. volume was, as I mentioned in the prior call, going to be noisy for retail in the back half of the year. We certainly saw that in Q3. About half of the volume declines in retail were specifically related to whole birds. Private label snack nuts, the exit of certain businesses there, which we've talked about before as well as contract manufacturing. Beyond that half, there was a volume contraction that we expected with the elasticity impact from the 2 rounds of retail pricing that we announced and implemented late last year and early this year. So that was another chunk of it.

And then beyond that, there was some additional volume softness in a couple of businesses that we experienced in retail. So overall, I would say there was some step back on consumer takeaway across our branded retail business and what has been a choppy environment. But that being said, it was modest, right? If you look at our total Hormel consumption for the quarter, our dollar consumption was minus 1% after having been about plus 1% earlier in the year. And underneath that, we actually see really strong consumer takeaway and growth on many of our priority retail businesses. So to get to that part of your question, some of standouts there, Jennie-O ground turkey, Hormel Entrees, those are 2 businesses that saw mid- to high single-digit consumption growth. We also saw growth on Applegate our center store can portfolio, Herdez, Hormel Black Label bacon and importantly, we saw consumption growth on Planters.

So if you kind of take a step back and say, okay, the focus areas of retail, we're seeing some really good consumption momentum across a number of those businesses. And while the environment is not getting easier, we continue to feel really good about our protein-centric portfolio offering value to consumers and some of the pivots we're making around positioning and marketing those businesses.

Your next question from the line of Peter Galbo with Bank of America.

I guess just for the first piece of it, Paul, I think you spoke a little bit about this in terms of kind of seeing a delayed benefit of some of the lower input costs coming through. And I just -- I wanted to understand a little bit more if that's a function of I guess if you had weaker volume, the inventory turns a little bit slower, and so it doesn't come through as quickly. And so we will look at that benefit, but it's really more delayed into next year. Or is it, hey, we should see some deflation in inputs, but actually some other stuff has moved up on us. And so maybe it's not the same level of tailwind than we thought it was previously. I just was hoping to get a little bit of clarification on that.

Thanks for the question. You're correct in the fact that the lower volumes obviously impact some of the inventory turns that we're going through and we recognize that. Also, the pork market didn't really start to decline until moving the way through the quarter. So it wasn't like we got a full quarter of benefit as we saw those decline in the markets from where we had thought. We are also looking, obviously, as you get into the pork markets, as I said in prepared remarks, the lower markets help our margin profile over time, and you will see that carry forward here based on our current forecast into the upcoming quarters and into '27 as well. But not every market component has been beneficial as well. So we definitely have some headwinds still in the pork markets and a full commodity markets.

And then obviously, foodservice and retail handle inventory differently. The foodservice piece, obviously, you can price accordingly very quickly. Well, it takes a little bit longer to impact maybe some things in retail and invest in the business based on what other competitors that might be doing in certain categories.

Got it. Okay. And Jeff, I guess if I could just ask on the revised top line sales guidance. I think you said year-to-date, you've kind of been running about about 1% on the organic sales side. So I mean, I know the range is still 1 to 2, but should we be airing, kind of, more on the lower end of that 1 to 2 just given some of the things that John talked about for Q4, maybe some of the commodity-based pricing dynamics that are going to come in. Just want to make sure that we're, kind of, level set on where we, kind of, exit the year from a run rate standpoint on organic sales.

Sure. I mean we're -- I guess we're comfortable with the range of 1 to 2. I'd acknowledge that, okay, the first couple of quarters are plus 2, plus 3. We're probably not seeing that for the fourth quarter, but we're still having strong momentum on the food service side, and the team is hard at work at addressing some of the retail brands that have weaker performance. And so we're comfortable with that overall range.

Your next question from the line of Michael Lavery with Piper Sandler.

Just wondering if you could give us some of the key considerations or maybe some of the building blocks you're thinking about for fiscal '27. I realize it's early, and obviously, you're not committing to anything, but anything that the market or investors might be overlooking or missing how to think about maybe the favorable input cost carryover or carry through would you imagine any more inventory rebalancing? Or is that done? Any kind of breadcrumbs would be helpful.

Yes. Michael, thanks for the question. This is Paul. You're correct. It's still early, obviously, and we're not ready to give guidance. But through our integrated business planning process that we've implemented, we are actually a little further along than normal. So I do have some color to share with you for your question. The positive side, we've got strong momentum for our Foodservice segment, which we project going forward. We also are seeing benefits of evolving retail strategy, which is accelerating growth in priority brands such as Jennie-O and Applegate. And then we do have a favorable read so far for pork input costs, which can allow us to increase investments if needed. And obviously, fiscal '27 is going to include a 53rd week. Some cautionary notes that we've seen so far is that the consumer environment, we are not envisioning a meaningful improvement in the upcoming quarters. We do expect the cost input environment to remain pressured in some areas, specifically logistics expenses, grain prices and beef costs.

And we've also got portfolio shaping activities which will adjust the top line but not on the bottom line, and that's the whole bird Turkey divestiture as well as Brazil. We're also going to continue to evaluate investment needs for the business and what capabilities can come from those investments. But while it's still early in our process, there are meaningful puts and takes to consider and we're very optimistic about the future.

Okay. That's really helpful. And just a quick follow-up on international. You laid out a few of the moving parts there and certainly some one-offs. But any sense of just how to think about a little more of the run rate going forward? Is there a kind of sense of what's ahead that you can give us that snaps back from this quarter? Or is there some of the pressure that lingers? I imagine you don't want to be too specific, but just some help on how to think about the next few quarters in that segment would be great, too.

Yes, Michael, this is Paul again. I'll take that as well. You are correct, very noisy quarter, this one for international. However, we are making the right decisions here to strengthen our global opportunities and the underlying international demand. And those trends remain intact. We feel pretty good headed into the fourth quarter and into I will note that the biggest issue on the numbers you see for the fourth quarter were really around the SPAM brand export sales, which were adversely impacted due to the onetime legal entity transition. This did create that noise that you see in the third quarter, but it was the right decision to support the long-term evolution and the efficiency of our global operating model. So very positive about the future headed into Q4 and '27 international, but a very noisy quarter.

Your next question from the line of Tom Palmer with JPMorgan.

I wanted to follow up on Pete's question, just on the top line, 1% -- I mean like 1.0% year-to-date organic sales growth and the range is 1% to 2%. So it kind of implies that we go from minus 2 back to positive come 4Q. And so I'm just trying to understand what are the major drivers of that sequential acceleration? Are you already seeing it quarter-to-date or more to come?

Tom, this is John. So I'll try to give you a little bit more color around how we're thinking about enterprise net sales performance. So first, I will call out from a foodservice perspective, we've now delivered as we said in our prepared remarks, 12 consecutive quarters of growth. Certainly, there are a couple of dynamics sitting underneath that food service performance on third quarter. One was industry traffic is still muted, sluggish across many channels in food service and away from home. And on top of that, we did have some commodity deflation that suppressed some of the net sales growth as well in foodservice.

But yet, we did put up the organic net sales growth, and we have high confidence in that business going forward. So I'll kind of lay that out. Second, from a retail perspective, we do really like the momentum we're seeing on a number of our businesses. We're seeing, I'll say, growth, we're seeing the effects of some of the changes and pivots we've made around brand positioning, marketing, shifting more into digital and e-commerce behind some of our brands. We're starting to see some of those things really gain traction. So we like that. We also start to see a little bit of a change in the lapping dynamics as we get into Q4 and the private label nut exit that we've talked about a couple of quarters now will be behind us as we get into Q4. So that will also create a little bit of additional room there. So all in all, we feel good about the progress on retail, certainly more work to do, but we like the momentum we're seeing on key brands. We like our continued success on foodservice. As Paul mentioned, international was a little noisy in the quarter, but we still like our outlook there.

Great. John. And then on SG&A, the dollars were the lowest since 4Q '23. I know there were some cost savings that kind of took hold earlier in the year. And so maybe this was the first quarter where we saw the more full benefits of that. Just any framing of, kind of, that SG&A cost structure as we look forward? And how sustainable this level of spend might be when we look at 3Q versus future quarters?

Yes, Tom, this is Paul. Thanks for the question. So you are correct, obviously put in a lot of things at the start of the year that Jeff has mentioned previously regarding SG&A and some items. Those really have taken hold here as you get through the first half and now into Q3. So you hit the nail on the head with where that's at. We're obviously continuing to drive forward and looking at SG&A and making sure that we're spending money in the appropriate spot to drive the business as well as in advertising. So part of that decrease in advertising dollars in SG&A was in the advertising segment. which a lot of it was timing again in terms of new leadership in that area, making sure we're spending money wisely. We do expect to see some increased advertising spending here and then obviously a little bit too early to discuss our plans for '27 regarding the advertising spend.

Your next question from the line of Max Gumport with BNP.

I wanted to turn back to the consumer environment. One, just to hear a bit more about what you're seeing in terms of the pressure on the consumer and how that's impacting your business and how you're looking to manage through it? And then two, just the factors behind why you're not expecting any meaningful improvement in '27?

Yes. Matt, it's John. I'll take that question. So I would describe the consumer environment right now really is not improving. The headline for me is that consumers are still feeling quite strained with low sentiment and that strain -- a lot of it comes from those cumulative effects of inflation, which we've talked about before. I would add that high fuel prices have contributed further to that strain as this year has unfolded. So I think that's a bit of the backdrop. That being said, consumers continue to prioritize food. Overall demand for food remains resilient. And while consumers are demonstrating resilience, they're also coupling that with flexibility.

And what I mean by that is consumers are increasingly focused on optimizing for value, and I don't mean value in the sense of the lowest price point, but in the sense of just being more deliberate with their dollars. So I believe what we're seeing is that a company like Hormel Foods, where we have a protein-centric portfolio and we can deliver great value propositions for breakfast, lunch, dinner, snacking, convenience, portability, we're in a great spot to deliver on those consumer needs as they're becoming increasingly deliberate with those choices. So if you, kind of, step back and say, okay, how do we make sure as the consumer behavior is evolving around value and value seeking that we're evolving our portfolio to make sure we have the right offers, the right message, right point of purchase, right pack at the right price is the work we're doing.

And if you look at some of the success across our foodservice business as 1 example of that, where we continue to diversify across channels, away-from-home channels, commercial, noncommercial. We are increasingly becoming that ally for consumers to be there when they need it. And then if you look at the positioning work we're doing around our core brands on retail, we're also more and more pushing those brands into spaces where we can be a more versatile partner for consumers. So all in all, I would say consumer behavior is changing. Consumers are becoming more deliberate in this challenging environment. But frankly, it's an opportunity for us as we really believe that the convenience of our product, the affordability of our products, the taste of our products and our ability to meet consumers across a broad set of channels put us in a great spot to meet that consumer need.

As far as outlook into future quarters with the consumer, I mean, the environment is volatile right now, frankly. And so our expectation is the environment will continue to be choppy. It will continue to be volatile. And so we're anticipating that the consumer is still going to be dealing with that in the months and quarters ahead. Certainly, we'll be flexible, we'll adapt as needed. Should we pick up some tailwinds in certain spots with consumer sentiment, with consumer behavior, with growth additional growth in away from home channels. Those will be additional tailwinds for us. But at this point, our outlook is to assume that it remains choppy, and the consumer backdrop is strained.

Great. And John, congrats on the appointment as CEO, and you're stepping into the role at a time when your leverage is now in a very, very comfortable position on the balance sheet. Your cash levels are quite high. So I'm curious what your view is on capital allocation and what your priorities are on that front.

Yes. I mean, first of all, thank you, Max. I appreciate that, and Hormel is a wonderful company with a great history and it does have a strong balance sheet. We've always been very disciplined in our approach to capital allocation. Certainly, the dividend continues to be very important to us. And so that will continue to remain a priority for us going forward. We have also talked about the fact that the company does have a long history of M&A activity. We have been more quiet of recent years. But certainly, we continue to be open to strategic partnerships, strategic acquisitions, things that could make sense for us strategically going forward, and we do have the flexibility on our balance sheet.

Your next question from the line of Heather Jones with Heather Jones Research.

Thanks for the question. I have my first question is, sort of, just detail-ish. So I was wondering if you're able to just broadly quantify the volume impact of that legal entity change? I mean, with volumes with organic volumes have been roughly flat, absent that?

It's -- yes, Heather, this is Paul. I don't want to get into specifics, but the majority of the decline in tonnage in international is associated with the legal entity change.

Okay. And then I've just taken the different questions that have been asked around input costs and demand, et cetera. But I just put it all together, I'm wanting to make sure that we all have the appropriate takeaway. It sounds as if you all still expect lower input costs, just whether it be dark meat turkey, on the pork side or whatever, to be a net positive into Q4 in '25 despite a more challenged consumer competitive environment. Is that the accurate takeaway?

Yes. Peter, that's right. That's exactly right.

Your next question from the line of Pooran Sharma with Stephens.

Thanks for the question here. Wanted to maybe get a better understanding of freight costs here. And you mentioned they were still pressured. How are they relative to 2Q? And as we think about the lower commodity input cost benefit for 4Q, just wondering if that's large enough to offset freight impact? Or how we should, kind of, think about the balance of those 2 items?

This is Paul here. I'll answer on the freight piece. Obviously, still elevated here for most of the quarter. We did see a temporary reduction in the fuel prices, but they lay a return to the higher levels. And even as of right now, they're at the highest level since the conflict started, our assessment of the logistics environment remains largely unchanged from the prior commentary that we've given. So freight, logistics and fuel costs continue to present those year-over-year headwinds and those trends are reflected in the outlook. So you are correct in terms of that the Q4 guide that we've presented that Jeff had talked about earlier, is holistic with all the input cost of pork being down and freight and fuel being up. So I guess to answer your question that all of them is -- freight and fuel a little bit higher than we've seen from Q2, but overall reflected in our guidance range here for the fourth quarter.

Okay. Appreciate the color there. And sorry if you got -- you gave detail on this earlier. But I wanted to ask about inventory rebalancing. I think in your prepared comments, you alluded to it being a little bit worse than expected. I was hoping you could help us dive into this a little bit, what came in kind of worse than expected? Are you able to, kind of, help us quantify any impact here?

Yes, sure. I'll kick us off on that one and then, Paul, feel free to add anything else you'd like to. So we did have some incremental costs this quarter in our supply chain. I'll come to the first point, which is what we discussed last quarter, the inventory rebalancing efforts we've been working through. Those efforts did result as we expected in lower production volumes flowing through portions of our manufacturing network. In addition to that, there were a few areas of the portfolio that faced softer category conditions during the quarter, so that contributed modestly to some lower volumes on top of the inventory rebalancing efforts. So that's kind of one piece.

Separately, we did also mention that we experienced a few discrete cost headwinds in the quarter. Last quarter, you may recall that we talked about we had an exceptionally strong quarter in the turkey supply chain. We were expecting this quarter to normalize following that strong quarter. results were a bit further pressured by higher temperatures and worse speed conversion in the quarter on Turkey. And then we did have some kind of onetime severe weather-related events that created power outages in a few of our facilities. So that drove some incremental cost.

But those we do really see a short-term impact one-timers in nature and shouldn't overshadow the capabilities we've talked about before, but the capabilities we're building for the long term in our supply chain, whether it's Hormel production systems, which we continue to drive consistent improved performance across our manufacturing network, some of the improvements we've made with data and planning tools and what Jeff alluded to earlier in terms of the enhanced collaboration and better decision-making in the enterprise, we feel really good about all of the progress in those areas we're making across our supply chain as we navigate some of these short-term headwinds.

And I'll just add on the inventory rebalancing piece for you that it did really progress as we kind of expected. You might see inventories are up on the balance sheet, but that's really the result of operating supplies and WIP inventory and not finished goods. Finished goods was relatively flat for the quarter, and it is significantly down from last year, both in dollars and somewhat in pounds. So we thought we did a good job in terms of what we wanted to do regarding that, and most of the actions did occur in Q3. There is still some stuff in Q4, but the majority of it was in Q3.

Your next question from the line of Rupesh Parikh with Oppenheimer.

So Jeff, with this being your last earnings call, we'd love to hear your perspective. Any key observations you see on Hormel's prospects going forward?

Well, thanks, Rupesh. I appreciate the opportunity to provide a view of what our team worked on during the past 12 months and what I think is important about that. First of all, I think it was important that we were setting a realistic top-down and bottom-up plan that was rooted in algorithm-based growth. growing from where we are rather than trying to make up for past years, I think sometimes the team maybe fell into that syndrome sometimes.

Secondly, I think we were very clear about both internally and then hopefully express them clearly to the investment community about deploying several different levers to enhance bottom line performance. We had solid top line momentum, but the bottom line has been coming along with it. So these include pricing, and we executed successfully 2 waves of that. The team has been focusing on mix. We've been able to generate further efficiency gains, and then we did take some significant SG&A actions, and we talked about that earlier on the call as well.

As John just alluded to, I think it's been important that we've improved the coordination of what is really a recently centralized business. It's only been 3 or 4 years since it used to be Jennie-O and Grocery Products in, kind of, separately run segments and now it's running on a much more centralized basis. There are very good advantages to doing that in terms of scale and efficiency and in terms of our importance to customers. But it really was important that we got the right people in the right room at the right time, with the right data to make adjustments based on changing market conditions.

And then lastly, sort of, a significant amount of side work in addition to, sort of, running the business on a day-to-day basis, we really did want to take this opportunity to look at the portfolio and see if we could make some more significant moves in getting ourselves positioned for the future. And so the moves with Justin's and with whole birds and with Brazil now really allow the company to better focus and reduce volatility and suboptimal performance in certain areas.

There are no further questions at this time. I will now turn the call back to Jeff Ettinger, Interim Chief Executive Officer, for closing remarks.

Well, I'll just take this opportunity to thank you all for your attention during the year. I think the company has established a solid momentum. And obviously, we think we have an advantaged position going forward with our protein-centric model. Our foodservice business continues to hum along and retail has several segments that are doing well also. And ultimately, I think we'll get that rolling in the same way. Also, it was a choppier quarter for international. But overall, we have really great growth prospects there. We've redoubled our attention in the Asia Pacific region with our strong leaders Swen Neufeldt now heading to Singapore to run directly there. So I'm very optimistic in the future of the company, and I'll be actively interested in how it goes because I'll remain on the Board of Directors and remain a shareholder. So thank you all for your attention today.

This concludes today's call. Thank you for attending. You may now disconnect.

Good morning, everyone, and thank you for joining us at Oppenheimer's 26th Annual Consumer Growth and E-Commerce Conference. My name is Rupert Parikh. I'm the Senior Food, Grocery and Consumer Products Analyst here at Oppenheimer. I'm happy to introduce our next presenting company, Hormel Foods. Joining us today are President, John Ghingo, and Interim CFO and Controller, Paul Kuehneman. So thank you both for being here. The format of today's session will be a fireside chat with a number of questions I prepared.

So let's begin. So John, I'd like to start by giving you some time to introduce Hormel. Who is Hormel today? And how do you differentiate your company in the current food industry?

Well, great. Good morning, Rupesh, and thank you. Yes, we really -- we like our plot in the industry right now with Hormel Foods. I'll talk a little bit at a high level of, I think, what makes us a different kind of company and why we're well positioned right now. We consider ourselves, the line we use is the consumer company that wins with protein. And we do see ourselves as different from a pure-play protein company, different from a packaged food company in the sense that we really play broadly across proteins, but we're very focused on the consumer. So if you look at our portfolio from a protein diversification standpoint, we have to obviously have a legacy business that we built over many years that's built around pork. We have a strong turkey business. We have strong beef, chicken as well as nuts and nut butters.

That protein diversification gives us a lot of opportunities to connect with the consumer. The other part that really is a differentiator for us is our balance across channels. If you look at how our business has developed across both retail and what we call foodservice, which is really away-from-home channels, we have a great opportunity to meet consumers where they are, whether they're bringing things home to prep in the home kitchen or they're out away from home consuming food and looking for protein. And so when you step back from that and look at the rising demand for protein in the U.S. and globally and how consumers are looking for more protein in the morning, more protein throughout the day for snacks, we feel like we're in a really good position to capture more and more of those consumer occasions.

And the focus for us is just to continue to make sure we're converting those proteins. We're not just trading proteins, but we're converting and adding value. So think about trends like convenience, flavor, affordability right now is a key topic with many consumers. And so making sure our portfolio, which plays well to affordability is also meeting their needs. All of those things have given us, I'd say, a certain resilience to our demand which we feel very good about, but a lot of opportunity going forward as well. And actually, maybe, Paul, do you want to comment a little bit around demand over recent quarters?

Yes. Just to highlight that, John, I mean, we just announced our Q2 results a couple of weeks ago, and obviously, our sixth consecutive quarter of organic sales net growth, which is great to see. Also, we were able to improve our gross margins in the last quarter. So we continue to move forward regarding our transform and modernize initiatives to help drive the business and propel us forward.

Great. Thank you. So before diving into some more strategic questions, I'd like to touch on the consumer environment. How do you characterize the current health of the consumer across retail and foodservice? And are you seeing any incremental shifts between food at home versus food away from home or across retail channels?

Yes. I would say the big theme for us with consumers when we talk to them is just the -- what I call the cumulative effects of inflation that have piled up over the past several years. The consumer is strained. There's some caution there. On top of the cumulative effects of inflation, the recent fuel spikes and gas price spikes have impacted consumers as well. So the way I look at it is demand in general in food has been resilient, particularly in protein. We've seen consumers still spending on protein. But increasingly, consumers are what I call deliberate, being very deliberate and looking for value. So when they're spending, they want to make sure they're getting good value for what they're putting forward in terms of dollars. So while the sentiment is low and consumers are strained, if the value equation is right, consumers will still pay. Now if I look across channels, I would say both retail and foodservice have demonstrated some sluggishness but also some resilience.

And in the foodservice channels, in particular, traffic has been generally, I would say, slow across the board. There are some pockets that are better than others, but at the macro level, traffic is slow. So when we talk to our operator partners in the foodservice space, a couple of big themes are menu inflation, right? They're trying to control those menu prices because traffic is slow. They're still trying to differentiate their menus to fight for traffic and compete for share in what is a sluggish environment. So we just -- for us, as a company, we need to stay very focused on the value equation for consumers to make sure that we're there as a partner to them when they need something and with our operator partners to help them solve those issues to manage labor, to differentiate their menus and bring solutions that can help them win in a strained environment. So strain, I guess, is the word, but there's resilience there, and we're there to partner on that.

Okay. Great. I'll now switch here to some Hormel specific questions. So John, since you took over as President of Hormel in July of last year, your team has seen meaningful traction and turnaround efforts, including a stabilization in the underlying business. This is highlighted by 6 consecutive quarters of positive organic sales growth and expectations for a return to earnings growth this fiscal year. So if you step back and look at the past year, what areas have performed better than your initial expectations? At the same time, what areas might the company be seeing slower progress than what you initially hoped for?

So there's been a lot of change in the company over the past few years. I would say a lot of positive change and important foundational change for the future. So if you go back a few years, we stood up what we call our go-forward operating model, where we really went to a scaled operating model for the first time with 1 retail, 1 foodservice, 1 international division. So 3 operating segments as well as 1 global supply chain to support that. That was a very foundational change. We also, as you will recall, a couple of years ago, began our transform and modernize program, where we put a number of investments into the company across all different areas across the supply chain, planning, making, buying, moving our products as well as investing in data analytics systems. All of that was foundational work.

And I will say some of what -- to the point of your question is some of the value of that came quickly, right? So if you think about some of the savings we were able to get in procurement as an example, of standing up a procurement function and organizing ourselves around the buy pillar. Some of the other areas are truly foundational changes that are starting to pay benefits now, but actually set us up really well for the future and take more time. So if you look at how we are operating our manufacturing network as another example. We've talked about Hormel production system. For the first time as a company, we've moved to one operating system for all of our manufacturing facilities. Now that's given us some quick wins, but it also -- a lot of that benefit is still ahead.

So I think we have examples in terms of both of those on how we're progressing, which is some things coming in now, but more importantly, the foundation we're setting for the future, we're going to continue to capitalize on those benefits going forward. And then the last piece I will mention that is a little bit longer term in nature, just portfolio shaping. So we've talked publicly about how we continue to look at our portfolio. We've made some strategic moves to exit some businesses, to divest some businesses. And that work is very important also in getting the foundation of the company set. So some of those have been announced, obviously, we can dive into those later if we want to. But I would just say that all of that is work that is starting to yield some benefits now, but sets us up really well over the next few years.

And then we've also seen meaningful change in senior management at Hormel lately, including the company's first Chief Technology Officer and a new Chief Marketing Officer. Do you believe the core parts of the team are now in place? Or are there further opportunities to enhance the team?

Yes. Thank you for that question. I mean certainly for me, since I took the President role last year, building the leadership team now has been a major priority for me. And you're right, we established a Chief Marketing Officer role. We hired Jason Levine into that role, a great marketing person with a lot of industry experience. Don Monk took the Chief Technology Officer role. Don is another person with great deep industry experience. On top of that, there were 2 other key leadership appointments in the past 6 months. So we brought in Will Bonifant from Hershey, who is instrumental in supply chain transformation. He's kind of setting a new vision for our supply chain. And then we also hired Domenic Borrelli, Domenic has a long background with industry experience as well at Kraft and Danone and Domenic backfilled me in the retail role.

I mentioned all 4 of them because they all come with deep industry experience they're helping us see things that we needed to see, frankly, from an industry perspective as we're transforming ourselves and becoming more and more of a consumer-focused company. That being said, we have in Hormel, and I always like to mention this because it's a critical part of the equation, deep institutional knowledge and many leaders with 25, 30, 35 years. And so my leadership team really is made up of a blend of both outside experience with some good lessons we can learn externally as well as folks who know the protein markets, who know the culture of the company, who know the customers of our company really, really well.

And so we've created what I consider to be a best of both team, leadership team to lead the company forward. And the team is working really, really well together very focused on culture, very focused on results and very focused on lifting the organization, training, teaching, developing talent. So yes, I feel very bullish about the team we put in place. I feel like we have moved in a direction that will allow us to really get the best of both. I would point out that Paul is another example of someone on our team with deep company experience. Paul has done a great job stepping into the Interim CFO role. He has 30-plus years with the company, knows the company inside and out. So he's just an example of some of the talent we have here at Hormel Foods.

Okay. Great. And then as you look at all these leadership changes, what new opportunities do you believe these leaders can unlock?

Yes. So I would say the -- in the prior question, you asked me about some of the -- what's still ahead and the foundational investments we've made in technology data systems. The new leaders are coming in now and kind of plotting the future to say, okay, what are those opportunities, what's out there? I'll point to a few things where we're accelerating our efforts. So brand building, modernizing and accelerating our brand-driven growth is a critical opportunity. There's so much there for us to connect with consumers into the future. Innovation is another one, thinking about building scaled innovation platforms that can operate and serve the company across channels, across markets.

So think about both in the U.S. as well as globally, brand building, innovation efforts. E-commerce is another area where we're accelerating our efforts. Revenue growth management is another area where we're strengthening our capabilities and investing for the future. So because we've put those foundational pieces in place, there's so much more we can do now. And the new leaders are coming in with the right experiences, the right understanding of how do we put those pieces together. So both accelerating the top line, but also making us just a more efficient, more profitable company and leveraging bigger platforms for growth.

Okay. Great. I'm now going to cover a few questions on your portfolio. So late last year, the company announced a new strategic partnership for the Justin's brand. And in April, you completed the sale of the whole-bird turkey business. So curious, as you sit here today, how do you feel about the health of the underlying portfolio? Are there opportunities to further optimize Hormel's offering? And what do you see as the biggest areas for improvement within the portfolio?

So yes, I mean, we continue to look across our portfolio, right? It's an ongoing process as we strategically assess what we have today. We're a company that's been built over many, many years, over 130 years of acquisitions, but also organic growth and creating new categories and brands. So it is an iterative process for us to continue to look at what makes sense for us going forward. In the case of some of the businesses that we have moved away from, they were strategic decisions. They're good businesses. So take Justin's as an example. Justin's is a very good brand with some strong affinity with consumers and retailers. But what we were seeing is the growth on Justin's was really coming from a noncore area for us, which was confectionery. And so it made sense for us to say, okay, even though this is a strong brand at the size it is and where the growth is coming from, we should create a different situation.

And so we sold the majority of that business to a private equity firm which made sense to extract the value for that brand. In the case of the whole-bird turkey business, a very different example. That's a business where there's a lot of volume, a lot of revenue to be had, but it's a very volatile business year-to-year, more commodity-based. It's not a growing area in terms of consumer demand. In fact, demand is flat to maybe slightly down year-over-year. So it just didn't align with where consumers are going and it didn't fit the type of value-added business we're looking to create. So we've done those.

We've also announced publicly that we've exited some strategic businesses, private label snack nut business as an example, where we've scaled back. So those are some of the moves we're making. We're -- our #1 focus is building our branded portfolio in retail and growing our foodservice business. And so that's where we want to put our energy. So if you think about where are those opportunities for growth, our priority brands in retail have a lot of opportunity to connect with consumers. Whether you look at our center store portfolio with brands like SPAM and Hormel chili, think of those as more affordable type proteins. If you go out to the perimeter and think about brands like Jennie-O ground turkey, which is incredibly aligned with consumer preferences or Applegate, which is connecting with consumers in a more premium way with the natural organic benefits that consumers are looking for.

And our poultry set there in general between Applegate's chicken portfolio and Jennie-O is a great area for consumers right now. And then just think about our nuts and nut butters, if you think about SKIPPY and Planters, these are great brands with a lot of potential for substantial snacking. So we love our branded portfolio in retail. And then the other thing I'll just point out in terms of portfolio priority is we have a great foodservice model, an advantaged model that we go to market with that's allowed us to deliver consistent growth on that business. quarter-over-quarter-over-quarter. Even when traffic is strained like it is right now, we're still able to grow the top line because of how we connect with operators and deliver solutions.

So we continue to look for opportunities to dial up and dial in on foodservice, where we can accelerate growth with some of our critical platforms there. And then I will just touch on since it's portfolio in general globally, we see some real nice opportunity across the Asia Pacific region. So our China business has continued to perform well. We've built that over many years. It's now at a size and capability level where we can invest more in it to accelerate growth. But it's also a feeder to Asia Pacific generally, and we have a number of investments and partnerships across the region in Asia Pacific, which allow us to think about really how do we align ourselves with which is a high-growth region globally with a lot of protein demand forecasted to continue to increase into the future. So those are some of the priority areas we look at within the portfolio.

And then as you think about potential opportunities within the portfolio, how do you think about building these organically versus through M&A?

Yes. I mean our focus is on organic growth. So we certainly see through innovation, renovation, investing in brands, investing in selling capabilities, some of the other capabilities I mentioned earlier that we can grow our businesses organically and accelerate that growth nicely in the years ahead. So that is our #1 focus. That being said, we also have a history as a company of acquiring other entities and making investments in other entities, and we've had a lot of success and contributed to our growth by doing that as well. And so if you think about it from a strategic standpoint, where is the consumer going in terms of that demand for protein? Where are they looking for more health and more convenience? Where are they looking for different occasions around protein and how could an inorganic or acquisition target or strategic opportunity fit the portfolio that we can add value to, to meet those consumer needs. And maybe, Paul, this would be a good chance for you to talk a little bit about how we look at M&A.

Yes. No, thanks, John. I think we have a strong balance sheet right now, obviously, and we've got a very disciplined approach to M&A that we've taken over time with several examples as John kind of talked about within maybe the foodservice area as we acquired Burke and Fontanini as well as in the retail area with like Applegate. But really, it's all about getting that right target at the right price at the right time and making sure our diligence process takes all of that into account as we go forward in the M&A field.

Okay. Great. And then what are your key innovation priorities? And how are you aligning the portfolio to major consumer trends like protein, which you discussed earlier and then GLP-1 adoption?

Yes. So it is an interesting time. There's a lot of opportunity in the food industry right now. Consumers are shifting their expectations and some of the things they're looking for out of their foods. And so we've actually landscape what we could call the consumer demand framework and future-proof that to kind of look out and say, okay, where do we think this is going? Where are the market spaces within there of opportunity that we think we can position our brands and innovation into. And so when we do that, we see a few interesting things emerge. One is the nature of snacking is changing. The snacking behavior is still there. People are still looking, call it, snacking or call it eating smaller portions. But people are looking to eat more frequently, smaller portions of food throughout the day, less kind of bigger meals sitting out for bigger meals. So we do see that trend. Underneath that is some of the traditional snacking categories are under some pressure.

So if you think about snacking categories that are built with products that have a lot of carbs or sugars, those categories are under a bit of pressure because consumers really are not looking for those types of snacks. What they're looking for is what I would call substantial snacks. So what are things I can fuel myself with during the day that give me some protein that make me feel satisfied, that satiate me, that may give me the energy I want. And so many consumers are associating those benefits of protein. And so they're actually looking to kind of dose protein during the day. And it's not just younger consumers, although there certainly is a bit of a frenzy around protein right now with younger consumers and Gen Z looking for protein in everything.

But if you just step back from that, the 25-year trend around protein has been a journey of understanding, education with consumers. And so if you look at boomers, Gen X, millennials, Gen Z, there is an increased appetite for protein broadly during the day. So snacking is an example of where we see the shift happening, where those consumers want to snack on protein. The other one that to me is very clear is morning. So if you look at how people are eating in the morning, they are looking for more protein, more substance in morning foods and less carbohydrates. And so as we think about innovation, we think about, okay, how do we take our portfolio of brands and our capabilities to deliver those morning solutions they want that are easy, quick, convenient and protein-rich, how do we do that for snacking?

And frankly, dinner hour is also one where people are looking for quick, healthy dinners that they can get on the table quickly at home or away from home that are healthier. And so we're focused on all of those areas from a trend perspective. GLP-1 is kind of underneath that is one of the drivers of how people have different expectations, right? So the GLP-1 community is looking for certain things that tend to be protein and fiber to enhance their diets. But it's broader than that, if you kind of look at the various food communities and what people are looking for, a lot of those trends extend where folks are looking for similar benefits for different dietary tribes.

Great. So that's a good segue into my next area that I want to touch, Planters. So Planters seems to have fit well into that theme as a non meat-based plant protein. So can you walk us through the road map of opportunities from here for the Planters brand?

Yes. So Planters is very much one of our loved brands, good acquisition for the company to get us into really that, what I call, substantial snacking space, the leading brand is snack nuts, able to play broadly across the snack nut and snacking categories with the brand that has a lot of equity. So the position in plant-based protein, the position in substantial snacking is a very strong one. That being said, in the longer term, dialing up the innovation to connect with consumers of different ages is critical for us, right? How do we continue to do that? We've had some success with bringing exciting flavor combinations that have helped attract younger consumers into the brand and the category.

We need to continue to stay on the front foot with innovation, brand building, renovating the Planters brand. So all of that work continues. That being said, the here and now in the category, 2 of the areas we put a lot of focus for Planters. One is revenue growth management. We do have a very large portfolio across many channels. So you'll find Planters really across our foodservice away-from-home channels. If you think about convenience, if you think about unattended retail, if you think about all the places where snack nuts can be, we want Planters there as well as traditional retail channels. And so investing in revenue growth management and price pack architecture capabilities, which we are doing as a company, Planters is our #1 priority as we build that capability out of how we're going to adapt our portfolio to get to the right price, right pack, right channel combinations.

And then the other area we're putting a lot of focus is e-commerce. So Planters has a significant opportunity to drive online penetration as an impulse category where we can capture more purchases by, again, having all the basics right in terms of the digital shelf, our assortment on shelf, our pricing strategy. So Planters, again, there as we're investing more in e-commerce and digital capabilities is our #1 priority. So in the short run, we see a lot of opportunity to accelerate our Planters performance by focusing on revenue growth management, e-commerce. Longer term, that innovation and brand-building machine is still a very, very good opportunity as well.

Okay. Great. I now wanted to switch to your retail segment. So revitalizing the retail segment has been a major focus for your team. We saw some green shoots in Q2 with the return of positive organic sales growth. I was hoping you can talk about the key efforts here as well as your confidence getting retail back to even stronger levels of sales and volume growth over time.

Yes. Thank you. So retail is a segment that we've done a lot of work kind of revamping. We continue to invest a lot of time and work in renovating for the future. When I step back from it and say, okay, number one, how are we performing with consumers? And in the second quarter, our consumption was up. Total Hormel consumption was up 1%. That was driven by consumption growth on our priority brands. So we like that starting place is our consumption has steadily increased. And we want to make sure we stay on that path. Number two, we have had to implement a number of different pricing actions in retail that we've talked about before. When we saw the inflationary pressure come in the back half of last year, protein markets spiked, they spiked again as we went later into the year. We had to put in place multiple waves of pricing actions on our retail business. So that has expectedly suppressed volumes to some extent.

The elasticities on our retail business have largely played out in line with what we would have expected with those price increases, but it definitely has taken volume out. On top of that, and I talked about this kind of the back half of this year is going to be a little bit noisy for us in retail because we do have some of the volume coming out from those pricing actions, but we also have some of the businesses that we are walking away from, if you think about the private label business I mentioned earlier, if you think about the whole-bird turkey. So you're going to see some of that play through. So our focus will be continue to drive branded consumption growth, continue to focus on the priority brands. So if you think about brands like Jennie-O, Applegate, Black Label bacon, our Mexican business with Herdez, these are some of the businesses that have been performing well, where we believe we can continue to invest and keep them performing well.

The pricing actions, while they have suppressed volumes, they have helped us recover margins on retail. We saw that play out as well. And then over time, the 2 other things, I guess, I would mention. One is we'll continue to do the portfolio strengthening and shaping work. We have a portion of our retail business with really good margins, very branded business that's very attractive. We want to continue to focus on that business. And if there's pieces that don't fit, we'll continue that work to exit those businesses over time. But two, we have strengthened our leadership team and capabilities, I would say, pretty well over the past year. So the new retail leader we brought in as well as a very experienced leader over the RGM and data space that we brought in, those capabilities will start paying as well, right, as we accelerate our retail performance. So we still have work to do, but I feel very good about the progress in the future ahead.

Okay. Great. Now turning to foodservice, which has been a clear bright spot for Hormel for a long time. The foodservice momentum continued to Q2 with organic sales up 7%, marking the 11th consecutive quarter of positive growth. What is your team's confidence in sustaining momentum here? And what are the bigger opportunities your team still sees in this channel?

So it's interesting. I guess the 2 comments I would make is I mentioned earlier that I believe we have an advantaged model in foodservice. The biggest piece of that is our direct selling organization, which is working very closely with operators across channels, across the country. And so by being in the kitchens, talking to the operators, we can see where their pain points are. If we can help them take labor out of the kitchen, if we can help them control pricing on the menu, even though inflation is happening, what are the other things they can control like labor. And if we can bring them news, can we actually help them win and can we win in a time when the industry is down. So I'm very confident in that capability. I'd like to say our salespeople are not just salespeople.

They're insights gatherers, they're problem solvers, they're innovators, right? They're doing all those things. And so number one point is that model is advantaged. Number two is we do have very broad channel diversification of foodservice. So if you look at our business, commercial, noncommercial, if you look at it as what we call down the street, the mom-and-pops, independents to the bigger chains, we cover broadly across, which means we can find the pockets of growth and dive in to accelerate our performance and the operator's performance where we see those pockets of growth and opportunity happening. So we are on, I think, 11 consecutive quarters now of foodservice growth. We want to keep that going.

Great. Now I want to go back to Paul. Go ahead, Paul.

I'll just add one thing on the foodservice piece there, sorry, Rupesh. On the multichannel mix that John talked about here is really important as well between colleges and universities, hospitals, K-12 and even the backside of the convenience stores of their back-of-the-house pieces they're making food for their consumers to come into their stores, really important, and that just adds another dimension to our foodservice business.

Great. I want to go back to a topic we briefly touched on earlier with some of the management changes. As we look at the capabilities and investment in Hormel, how should we think about your ongoing investments and capabilities, particularly supply chain modernization, technology and AI and the benefits expected over time?

Yes, I'll take this one, Rupesh. Thanks for the question. We are making targeted investments in capabilities that we view as foundational to the company's performance, specifically in supply chain and in technology and data. Supply chain is one where John talked a little bit about the HPS system, the Hormel production system that we've done a lot of work on over this transform and modernize process the last 3 years and getting a standardized view of how the plants are operating, which has really provided benefit and productivity savings. The other piece I want to make sure we talk about is that we aren't -- we haven't lost sight of automation in our facilities. The automation in the plant is key in terms of our capital allocation over the course of time, making sure that we're running efficient plants with the newest technology available.

On the technology side, definitely improvement in the visibility and the decision-making process is the keys there. We've got a lot of new systems going into place and that are operating now that will help us drive value in the future. John referenced revenue growth management as a key one there and also the price pack architecture are 2 examples of where we're using some of that data and technology and to improve our business in the future. That being said, I just want to like kind of reinforce that those aren't onetime initiatives. A lot of the stuff that you're seeing now is still being implemented. We're in the process of really seeing the benefits come forward, and that should drive a lot of value in the coming years from the transform and modernize initiative that we completed or are completing here at the end of this year.

Great. So we have about 5 minutes left. So I just want to wrap up with a couple of financial questions. So cost pressures are very topical in today's market, including with the Iran news overnight and I guess, even this morning. How should we think about cost pressures today in your business, including freight and fuel and the path to improving margins over time?

Yes. Great question. Obviously, we're still operating in a cost environment that has some pressure, as you mentioned, freight and fuel as well as certain input costs such as beef and even pork it's at a 5-year or close to the 5-year high averages. So we factor that into our outlook. That being said, we do have a clear framework for how we manage through a lot of these details, whether it be in pricing and the items that we have put in place over the course of the last couple of years as we've seen some of these things increase. as well as mix improvements, productivity in the plant like we talked about and then also portfolio optimization, as John has been talking about with some of these things in the whole bird, turkey, Justin's and private label snack nuts. So while there can be some variability quarter-to-quarter, the long-term direction for margins remains positive for us and something we're looking to improve as we continue to go forward.

And I want to switch to one longer-term question. What underpins your team's confidence in delivering the longer-term growth algorithm? And how are you prioritizing capital allocation to support that?

Yes. Thanks for that question, too. The algo really encompasses growth across all segments and channels and that we feel it's appropriate for our portfolio and our business. The 3 areas that we focus on, obviously, are the dividend. We're aristocrat with over 60 consecutive years of increasing that dividend. It's something we take very serious, and we definitely are focused on continuing. As I mentioned, investing in our facilities in terms of automation and the HPS systems that we're implementing and always continue to look for improvements in how we manufacture our products. And then we briefly talked already on M&A earlier, but making sure that we've got that disciplined approach with the right targets, the right price and the right time to make sure that we continue to look at M&A availability and that we are open for business on the M&A front, as Jeff has stated on previous earnings calls.

Great. So I'm going to conclude with one final question. Just on the e-commerce front. So you guys talked about before, a focus on Planters and improving the penetration of Planters on the e-commerce front. But as you look across your portfolio, are there other brands or just opportunities do you see to further increase that e-commerce penetration over time?

Yes. It's definitely a capability we're building for the whole branded portfolio. We see a lot of opportunity. We do have certain brands where we are, I'll call it, ahead of the industry and very well penetrated. And then we have other brands that are lagging. We have some that are in the middle, right? That's kind of the spread of it. But I think all of our brands will benefit from what we're building. If you look at the consumption trends where the growth is happening in retail, so much of it is happening either in e-commerce or some form of online pickup and delivery.

And so as we're getting our back engine stronger in terms of our ability to work with data, have the right data and actually see things with the visibility that Paul mentioned. On top of that now, we're layering on really a learning mindset to how we go to market and connect with consumers closer to the point of purchase. E-commerce is just a wonderful environment. And so we're starting to see the benefits of that. Planters is a big priority, but we have a number of other areas across the portfolio where we will be increasing our focus and investment. And we see a huge opportunity to accelerate our growth through e-commerce on our retail business.

Great. Well, I would like to thank the Hormel management team for joining us today. So thanks, John, and thanks, Paul and best of luck for the balance of the year.

Thank you, Rupesh.

Thank you.

Thank you.

Good morning, ladies and gentlemen, and welcome to the Hormel Foods Corporation Second Quarter Earnings Conference Call. [Operator Instructions]

This call is being recorded on Thursday, May 28, 2026. I would now like to turn the conference over to Jess Blomberg, Director of Investor Relations. Please go ahead.

Good morning. Welcome to the Hormel Foods Conference Call for the Second Quarter of Fiscal 2026. We released results this morning before the market opened. If you did not receive a copy of the release, you can find it on our website, hormelfoods.com under the Investors section, along with supplemental slide materials.

On our call today is Jeff Ettinger, Interim Chief Executive Officer; John Ghingo, President; and Paul Kuehneman, Interim Chief Financial Officer and Controller. Jeff, John and Paul will review the company's fiscal 2026 second quarter results and provide a perspective on the remainder of the year. We will conclude with the Q&A portion of the call. The line will be open for questions following the prepared remarks. As a courtesy to the other participants, please limit yourself to one question with one follow-up.

At the conclusion of this morning's call, a webcast replay will be posted to the Investors section of our website and archived for 1 year.

Before we get started this morning, I'd like to reference our safe harbor statements. Some of the comments we make today will be forward-looking, and actual results may differ materially from those expressed in or implied by the statements we will be making. Please refer to our most recent annual report on Form 10-K and quarterly reports on Form 10-Q, which can be accessed on our website under the Investors section.

Additionally, please note, we will be discussing certain non-GAAP financial measures this morning. Management believes that doing so provides investors with a better understanding of the company's underlying operating performance. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Further information about our non-GAAP financial measures, including comparability items and reconciliations are detailed in our press release, which can be accessed on our website.

I will now turn the call over to Jeff Ettinger.

Thank you, Jess, and good morning, everyone. We delivered an excellent second quarter, highlighted by continued top line momentum and meaningful improvement in bottom line performance. Our top line results remained a clear area of strength as we achieved our sixth consecutive quarter of organic net sales growth. This performance reflects both the quality of our execution and the strategic positioning of our portfolio as we deliver these results despite a dynamic external environment.

All 3 segments drove net sales growth with notable contributions from foodservice and International and momentum across certain key retail brands. As we have said before, our protein-centric portfolio positions us well to meet consumer and operator needs, and we continue to see that advantage translate into marketplace performance during the second quarter.

We also delivered impressive double-digit adjusted earnings growth. In addition to our sales growth, earnings benefited from margin expansion, improved manufacturing performance and solid results from our joint ventures, which more than offset higher logistics expenses during the quarter. This resulted in segment profit growth across all 3 segments and second quarter results that exceeded our original expectations.

Encouragingly, the drivers of our second quarter results align with the growth levers we shared with you coming into the year, pricing actions, mix improvements, productivity gains in our supply chain and benefits from our restructuring actions are expected to drive growth throughout fiscal 2026 and were central to our second quarter performance. Finally, our continued focus on enhanced collaboration across the organization allowed us to respond more quickly to an evolving environment.

Given our strong first half results and improved visibility into the balance of the year, we have even greater confidence in our ability to achieve our full year plan. We are reaffirming our organic net sales and adjusted earnings per share expectations. Based on how the year is progressing and the underlying momentum of the business, we believe we are trending towards the upper half of our earnings range. However, we think that maintaining our current outlook is the right approach at this stage of the year and appropriately reflects near-term dynamics.

While we expect the back half overall to deliver both top and bottom line growth, we now see third quarter adjusted earnings to be more in line with the prior year. This reflects expected near-term cost pressures, including certain commodity inputs and higher logistics expenses as well as actions to rebalance some inventory levels, which Paul will cover in more detail. While this affects quarterly cadence, it does not change the strength of the underlying business and is fully reflected in our full year outlook.

In summary, we are very encouraged by our performance. We drove another quarter of top line growth, expanded gross margins and executed with discipline across the organization. We are confident in our ability to deliver our full year guidance and remain clear-eyed about near-term operating dynamics, leaving us well positioned for the year. We believe these results reinforce both the strength of our portfolio and our ability to drive sustainable, profitable growth over time.

With that, I will turn it over to John to provide more detail on our operational performance.

Thank you, Jeff. Before turning to the quarter, let me start with what we're seeing in our business and across our consumer base. While consumers are under pressure and sentiment is low, food has remained resilient in recent months, particularly with growth in protein where our portfolio is well positioned. Consumers and operators are prioritizing products that deliver clear value, whether it's convenient kitchen shortcuts, substantial snacking solutions or affordable protein options. We are focused on helping consumers and operators make protein work better for them.

Our approach to winning in protein is grounded in consistent execution, connecting with consumers in meaningful ways, delivering across usage occasions and meeting demand across a broad range of price points. We've stayed disciplined in how we price, innovate and partner with customers and operators, and this strategy helped drive the consistent top line growth we delivered in the second quarter.

In addition to this, as an enterprise, we executed well across our supply chain. The combination of protein-led growth and disciplined execution is apparent across our results for the second quarter.

Let's start with foodservice. This was another outstanding quarter with organic net sales growth of 7%, this marked our 11th consecutive quarter of organic net sales growth, with broad-based strength across this portfolio. Brands such as Hormel Natural Choice, Austin Blues, Jennie-O and Fontanini delivered strong performance. Just as important, profitability improved in the foodservice segment as market-based pricing went into effect, and we realized some cost benefits across our supply chain. As a result, we saw gross margin expansion and a segment profit increase of 11% for the second quarter.

In an environment where traffic remains pressured, we've been able to consistently deliver growth. Our solutions-based portfolio combined with our direct sales force remained a clear competitive advantage in the quarter. Working closely with our operators allows us to move quickly and deliver solutions that meet their evolving needs. In this environment, we delivered solutions across both value and premium tiers, which helped operators manage cost pressures while still differentiating their menus.

Take pepperoni and our leadership in pizza toppings as an example. Pepperoni was a driver of top line growth in the quarter with offerings spanning traditional to artisanal and mainstream to premium. The team continued to build on that momentum through innovation. And at this year's International Pizza Expo, our team launched new Calabrian chili pizza toppings, reflecting our ability to stay close to emerging trends that will help drive traffic. We believe this kind of innovative and anticipatory mindset will continue to propel our foodservice segment. Simply put, in Q2, the foodservice segment again performed at a very high level.

Turning to our International segment. We delivered a very good quarter with organic net sales up 5% and segment profit growing 20% versus prior year. These results reflect momentum across key markets and brands. China remained a driver, supported by strong demand and the success of our localized strategy. Our branded export business led by our SPAM brand also performed well once again, reflecting global demand and the strength of our portfolio. These results are the outcome of focused execution, disciplined investment of resources and a clear strategy to grow in the right markets with the right brands and products. And importantly, we see continued opportunities ahead.

Now to retail. Retail performed ahead of our expectations in the second quarter. We delivered 1% organic net sales growth, margin expansion and 13% segment profit growth. Performance was strong across several key areas in the business, though opportunities remain, and we are taking deliberate actions to address them. We continue to see momentum in our key growth platforms, particularly within value-added poultry.

The Jennie-O and Applegate brands continue to benefit from sustained demand for lean protein forward offerings. Jennie-O ground turkey delivered another quarter of double-digit dollar sales growth and dollar share growth based on the latest 13-week Circana data ending April 19. Applegate products have also continued to build momentum with a strong second quarter driven by frozen breaded chicken and chicken breakfast sausage. These platforms reflect how we are aligning with evolving consumer preferences and competing effectively across attractive growth segments.

Another area of progress is the Herdez brand, where we expanded distribution and benefited from innovation. The salsa portfolio delivered encouraging dollar and volume consumption growth in the quarter, and we are extending this authentic Mexican brand into new occasions through entrees, marinades and seasoning solutions.

Taken together, these results demonstrate how we are strengthening our relevance with consumers and expanding our presence across the store. We also executed with a measured and data-driven approach on pricing, where we work closely with our customers to implement actions strategically and in support of the overall health of our categories. Our second wave of pricing actions was fully reflected on shelf during the quarter, and elasticities tracked largely in line with expectations, reflecting this disciplined approach.

That said, we have a few opportunities across our portfolio where we can do better. In some cases, this reflects near-term timing-related dynamics, including promotional lapping where we have good visibility to recovery. In other areas, we are seeing more structural pressure requiring targeted actions to reposition those businesses. In these areas, we are focused on improving competitiveness through price pack architecture, more targeted promotional strategies and sharper in-store and e-commerce execution. At the same time, we are refining assortment, prioritizing innovation and ensuring resources are aligned to the highest return opportunities. Overall, we are encouraged by the progress in retail and remain focused on advancing performance across the portfolio.

Stepping into supply chain. We delivered solid operational results across the enterprise with meaningful improvements across our vertically integrated turkey operations. This was driven by favorable growing conditions and improved manufacturing performance. This operational excellence became a tailwind for both retail and foodservice profit growth during the quarter.

During our Q1 call, we flagged freight and logistics as an area we were watching. While those costs were a year-over-year headwind, we improved execution in the second quarter to better navigate the environment and manage costs. This reflects the benefits of a more connected and responsive supply chain. Beyond this, logistics costs were further impacted by the increase in fuel prices, which added incremental pressure during the quarter. When you step back, the progress we are making across the enterprise through our brands, our customer partnerships and our internal operations reinforces that the work to sharpen our strategy and strengthen our capabilities is translating into more consistent execution.

We also see opportunity to move faster and unlock additional value, especially through technology. We were excited this quarter to welcome our first ever Chief Technology Officer to Hormel Foods, Don Monk. Don is an exceptional leader with more than 35 years of global experience and a track record of successfully implementing modernization of technology at large global organizations. The addition of the CTO to the leadership team represents an important step in strengthening our digital and technology capabilities and enabling greater speed, agility and impact across the business.

What I've seen across the organization is a team that is motivated to win and focused on seizing the many opportunities in front of us. I've seen firsthand the power of our protein-centric portfolio and the enduring demand for our brands and products. As we look to the back half of the year, I am confident in our ability to execute, navigate the environment and deliver on our commitments.

With that, I will turn the call over to Paul to discuss our financial performance for the quarter and our full year guidance.

Thank you, John. As Jeff and John noted, we delivered a strong quarter with solid performance across all 3 segments. Organic net sales grew 3% versus the prior year, marking our sixth consecutive quarter of organic growth. Cost of goods sold had multiple drivers throughout the second quarter. pork and beef remained elevated relative to historical levels, but overall, the commodity environment unfolded as anticipated.

As John mentioned, logistics remained a year-over-year headwind for us in the quarter, but not as large as we expected. Given the timing of the geopolitical conflict, the second quarter saw only a portion of the elevated fuel pressures. Despite this backdrop, we more than offset discrete cost pressures through top line growth, market-based pricing actions, favorable mix and ongoing productivity improvements. As a result, gross profit was up 7% versus last year, and gross margin expanded to 17.4%, up 70 basis points, reflecting strong execution across the business.

Equity and earnings increased 12%, mainly driven by year-over-year growth from our MegaMex joint venture. We completed an important strategic transaction in the quarter, closing on the divestiture of our whole-bird turkey business. This move reinforces our focus on higher value, less volatile branded offerings. We recorded a loss on the transaction reflected in SG&A, which drove the year-over-year increase in that metric. Adjusted SG&A was up just 2%, reflecting good cost discipline.

Adjusted operating margin expanded 80 basis points. Other income increased in the second quarter, primarily driven by the investment gains within the rabbi trust. Excluding onetime items, underlying performance was strong. Adjusted earnings per share was $0.40, up 14% versus prior year.

Turning to cash flow and capital deployment. We generated $179 million of operating cash flow. Capital expenditures were $82 million. We invested in data and technology and infrastructure to support long-term growth. We returned $161 million to stockholders through dividends, fully aligned with our capital allocation framework. We remain committed to the dividend and are proud to have reached our 391st consecutive quarterly payout.

We ended the quarter in a strong financial position with ample liquidity and a conservative balance sheet. Cash on hand totaled $827 million, up $156 million since the end of fiscal 2025. This gives us flexibility to continue investing in the business while returning capital to shareholders.

Looking ahead, we are confident in our position for the remainder of the fiscal year. We are reaffirming our full year net sales expectations of $12.2 billion to $12.5 billion, and our full year adjusted earnings per share guidance of $1.43 to $1.51. We remain confident in this guidance range, which incorporates a balanced and realistic view of the dynamic external environment. We are updating our GAAP earnings per share range solely to account for the loss on the sale of the whole-bird turkey business.

Let me walk you through a few key assumptions behind our outlook given our solid first half. At the segment level, our organic net sales expectations remain unchanged, including flat to low single-digit growth in retail, mid-single-digit growth in foodservice and high single-digit growth in international. As Jeff mentioned earlier, while Q2 came in ahead of expectations, we do anticipate some cost headwinds as we move into the third quarter and the back half of the year.

First, we are closely monitoring pork and beef markets. We do believe our guidance range appropriately reflects potential second half volatility.

Second, fuel is expected to remain a headwind, and logistics costs are projected to pressure results on a year-over-year basis. Execution strengthened in the second quarter, but the broader logistics environment remains dynamic. We believe we have plans in place to continue to mitigate these headwinds.

Third, we are taking targeted steps to rebalance certain ambient inventory levels. As we advance toward becoming an even more connected enterprise, this is a clear example of how integrated business planning is driving more forward-looking decisions. As we work through this adjustment, we do expect some near-term cost pressure, primarily in the third quarter due to lower plant utilization. However, this action supports a more efficient operating model going forward.

Finally, our effective tax rate is trending towards the higher end of our range. Overall, while we continue to expect bottom line growth in the second half, our current view for the third quarter is that adjusted earnings will be more in line with the prior year.

Turning to our recent divestiture of the whole-bird turkey business, there are no changes to our previously shared assumptions related to the transaction. We still expect about a $50 million reduction in fiscal 2026 net sales with minimal impact to the full year adjusted earnings. I want to take a moment to thank the teams who led and executed this transaction. Their speed, focus and thoughtful execution were critical in completing this work during the second quarter.

In summary, the strength of our second quarter gives us the confidence to reaffirm our net sales and adjusted earnings expectations for the year. We feel confident in our ability to continue delivering results.

At this time, I'll turn the call over to the operator, and we'll open it up for Q&A.

[Operator Instructions] Your first question comes from Leah Jordan with Goldman Sachs.

So you had really strong 2Q results today, but there's also been some investor concern around input cost inflation and freight heading into the back half. So seeing if you could provide more color on the decision to reaffirm the guide today and what sounded like even greater confidence in that outlook?

Thank you, Leah. This is Jeff Ettinger. I'll take that question. And I appreciate the chance to give more color on why we are comfortable with reaffirming our guidance range on both the top and bottom line. On the top line, clearly, we're rolling along. We have 6 straight quarters of top line growth, and we fully expect to keep it up in the second half. We are benefiting from our protein-centric portfolio and our retail and foodservice balance.

When it comes to the bottom line, we assess where we are at. And while we recognize that we are ahead at this point in the year, we feel we're still within the range. As I said in my comments earlier, we do believe we are trending to the upper half of the range at this point. Our ability to connect with consumers and operators, coupled with solid management of our business does indeed make us even more confident that we can deliver on our year plan and our algorithm growth.

In terms of timing, we did mention some challenges in Q3, and that was covered in your question as well. We do see that quarter coming in closer to a year ago. We will be looking at a full quarter of higher fuel expenses where -- our commodity market assessment right now is running above our original plan in terms of some of the cost inputs, and we will be doing some inventory rebalancing and having some of the operational changes that Paul mentioned in his comments.

These factors really don't change our view of the underlying strength of our business and in reaffirming the range, we recognize that this still implies bottom line growth in the second half, which we now expect to come primarily in Q4. Overall, we're more confident than ever in our playbook, our growth levers for the year and our ability to deliver our fiscal 2026 outlook.

That's all very helpful. And then just on a related follow-up. I think one of the things that really came through on your comments this morning have been around productivity improvements and the strength and execution there. And I know coming into the year, cost savings in SG&A was a big initiative. Maybe you could provide an update around what's been done, what's still left? So is this the right level we should be thinking about as a percent of sales at this point? Or I guess just the outlook on the SG&A savings.

Sure. Again, this is Jeff. I'll be happy to talk about that. Really, our SG&A reductions that we talked about are on track for the year, our efforts, I should call them, net-net as Paul mentioned, Q2 SG&A was up a modest 2%. But prior to the efforts that we undertook at the end of the year, we were trending at a much higher level than that. And we recognize that to put us in the best position to have our bottom line be more reflective of the growth we are already enjoying on the top line, we needed to take some actions to address that.

So there definitely have been some meaningful benefits from this work. We've had savings that have freed up capacity for growth objectives. We've been able to invest in new capabilities and talent. And indeed, we're also covering SG&A headwinds such as wraparound incentives. So last year wasn't a very good year. This year, hopefully, we will be paying out proper incentives to our team.

And I also want to add the reminder of what I talked about last quarter that some of the actions we took really didn't -- don't show up in the SG&A line. They show up in cost of goods as they related to costs that would roll through the plants. So bottom line, we're really pleased with the results we've seen thus far this year when it comes to the SG&A efforts and the steps we've taken on our structure and expense control seem to be working.

Your next question comes from Rupesh Parikh with Oppenheimer.

So I just want to start with the gross margin line. Better-than-expected performance in Q2. You did call out some headwinds that kicks back in Q3. So just curious how you guys are thinking about the outlook for gross margins in Q3 and then for the balance of the year.

Rupesh, this is John. Thank you for the question. Yes, we did have gross margin progression across the business. Certainly, if you look across the segments, retail, foodservice and international. I'll dig into retail a little bit since that's some of the driver and the change that we've seen.

Retail had a strong quarter, certainly after a softer start to the year. If you kind of play through the P&L on retail, we could start with the top line where we do feel good about the consumer takeaway we're seeing across the branded retail business. It certainly is a choppy environment. The consumer continues to be strained. But if you look at the health of our branded portfolio, and you know how important that branded portfolio is to our mix, we did see good consumption. So we saw plus over 1% consumption growth in the quarter on a dollar basis, which was driven by 3% dollar consumption growth in our priority brands.

So if you kind of flow that down then into the gross margin conversation, what you'll see is we had an improved profitability quarter in retail, no doubt. We experienced the benefits of that second wave of retail pricing. So we mentioned that in the call last quarter that wave was announced at the -- towards the very end of fiscal 2025. So really with about a 90-day lag time on that pricing being in effect, it was the second quarter that benefited from it in retail.

On top of that, we did get the positive mix benefits. So if you look at the growth we saw on Jennie-O Browned Turkey, Applegate, Black Label Bacon, those are all mixed drivers for us in retail. And then as we mentioned in our remarks, the manufacturing benefits in the quarter buoyed the business, and that buoyed both foodservice and retail.

So if you kind of step back and look at the drivers across the business, that manufacturing performance driven by turkey notably helped both foodservice and retail margins, pricing helped both foodservice and retail margins, and mix was a positive driver for both foodservice and retail.

Now that being said, on retail, in particular, we still have work to do as we're heading into the back half, if you kind of look at the big picture. Freight costs remain elevated, commodity costs remain elevated. We will see some impact on margins as a result of that rebalancing of inventory on select ambient items that Paul mentioned. And we still have work to do in retail in some of our brands that are not meeting our expectations.

So in general, we feel really good about the margin progression, certainly still some work to do, but we feel very good about our overall progress.

Great. And then my follow-up quick, just on retail. So return to positive growth this quarter, just confidence in sustaining the momentum for the back half of the year within retail.

Yes. Thanks for that question, too. So what I would say is we feel very good about our ability to continue to drive top line and consumption momentum on our retail business, in particular, on those priority branded businesses. We've seen a number of quarters of good consumption growth driven by our priority businesses. We feel good about the pricing we've put in place. Elasticities are performing largely in line with our expectations. So those elements feel good.

That being said, there will be some noise in the back half on retail if you kind of look at the changes we've made, which are important strategically for us in the long run in terms of portfolio shaping. You'll recall that we announced the sale of the majority of the Justin's brand, largely a retail brand for us. We mentioned last quarter that we're stepping back from some private label snack nuts business that was a big volume and sales driver for us. And most of that whole-bird turkey divestiture, those impacts will be seen in the retail segment as well.

So as we look at next quarter, as we look at the second half overall, the branded part of the retail business, we feel very good about the progression. We feel very good about our ability to drive consumption growth there. But it will be a bit of a noisy quarter in terms of overall impact on net sales and volume.

Your next question comes from Heather Jones with Heather Jones Research.

I first wanted to ask about the turkey network manufacturing changes you made. I would assume you had higher volume this year, so I'm sure that helped. But were there other changes that you all made in that network that helped and would expect to continue going forward?

Heather, this is Paul. Thanks for the question. Obviously, as John mentioned, there are some weather factors involved in there. As you mentioned, the volume improvements also helped putting the throughput through our plants. Overall, that's really what the benefits that we recognize in the supply chain. And then those favorable growing conditions also helped in terms of feed conversion and the weight of the turkey is coming through our facilities.

So overall, really good manufacturing performance. This can be cyclical, weather is never easy to predict. And so that's one of the things we are watching and we've got included in our range guidance for the second half.

Okay. And then my follow-up is, if I'm interpreting you all's commentary correctly, I just want to make sure I'm interpreting correctly. So year-on-year, within retail, you should have seen significant benefit from ground turkey pricing, just the turkey portfolio in general. But it sounds as if there was a broad-based profitability growth across your -- including your non-turkey business. So am I interpreting that correctly? And you think those businesses have stabilized?

Thanks, Heather. This is John. I'll take that and try to build out a little bit. So you are right. We did have a very strong quarter on ground turkey. So we saw double-digit consumption growth share gain, as I mentioned, and we had good performance through the supply chain.

That being said, we are seeing benefits across retail in terms of margin progression. And if you think about the pricing we took, the multiple waves of pricing when we saw the market spiking in the second half of last year, a lot of that pricing was rooted in things that were more beef, pork, nut related, where we saw increases in commodities. So that pricing flowing through has been really, really important. And then we've also seen mix benefits coming from other businesses that we've driven disproportionate growth, and that's been helpful. And our supply chain has been performing well overall. Outside of turkey, we had a good quarter.

Your next question comes from Pooran Sharma with Stephens.

Congrats on the strong results here. I wanted to start off and just better understand cadence. And I think you gave us really good commentary on 3Q is expected to be roughly in line year-over-year. I'm just wondering, when we look at that on a segment level basis, should we expect sequential pressure in retail or should we see some pressure in foodservice as well as we look from 2Q to 3Q?

Yes. Thanks for the question. This is Jeff again. As we did mention, we had a few discrete items to consider going into the third quarter. The spike that really everyone has experienced in fuel costs. In our case, we had 6 weeks of it in Q2. We'll have most likely all 13 weeks of it in Q3. We have seen commodity cost volatility. Our outlook right now is on the pork side would be a little bit more like last year versus what we had hoped to see some more relief, but that remains to be seen where that lands. And then what Paul and John both mentioned in terms of the targeted actions and certain plants to rebalance our inventories are why we're looking more at a kind of a flat year-to-year on the bottom line for Q3.

We do think our growth levers are still going to be working for us overall. As John mentioned, there is some noise in retail, particularly on the top line. And net-net, we're probably looking at a gross profit margin that's not quite as high as what you saw in Q2, but that's still improved over where we were trending before. So I think we have created some sequential improvements there. And then on the foodservice side, they will see some of the detriment of some of these challenges of freight in the network as well, but they've been on a very nice role and we expect them to be in a good position also.

Okay. Appreciate that. And just on the follow-up, would getting you to the upper end of guidance require additional pricing actions from here?

Thanks for the question. That's not one of the things that's getting us to the upper levels of the pricing range. We clearly have a lot of things going for us with continued underlying strength in the business. But really, to get to the upper end of the range, we're looking at foodservice over delivery, continued turkey strength. Obviously, volume and mix upside can provide some benefit. And then the commodity markets are going to play a big role if we're going to get to the upside of the range if they came in lower than forecasted. Those are really the driving forces of it. We do also have some wraparound pricing as would impact it, but that's not a driving factor to get to the top end of the range.

Your next question comes from Peter Galbo with Bank of America.

I know we've spent a lot of time talking about gross margin in the quarter. But Paul and John and Jeff, I think it might be helpful to kind of bridge the upside relative to your expectations? So I mean is there anything you can do to kind of help us understand the positive tailwind impact of the manufacturing in the quarter? Maybe what that was worth? I know you said logistics were a headwind, but then I think you also said they were maybe less of a headwind than you would have initially anticipated. So just any dynamics in the bridge for the quarter itself, I think, would be helpful. .

Yes. Sure, Peter. This is John. I'll kind of walk through the second quarter a little bit. And obviously, we were pleased overall with the second quarter results. As a headline, we would say, strong execution, but across the levers we've been talking about for the year. So clearly, strong top line performance is where it starts, and we did see that across the company. We saw a net sales growth in all 3 of our operating segments. Top line has been a consistent theme for us over the past 6 quarters, as Jeff mentioned earlier. But Q2 was another strong top line quarter.

On top of that, there were 3 other levers that contributed that we've been discussing. Pricing is one. I mean, pricing was really important. We saw the benefits of the pricing flowing through across the businesses that included, as I mentioned, that second wave of retail pricing that we discussed last quarter. I mentioned favorable mix, at the company level, foodservice is a favorable mix for us. So that nice growth number we put up in foodservice drives mix benefits for the enterprise. And then within the segments, foodservice was driving higher-margin brands. Retail is benefiting through that growth on Jennie-O, Applegate Bacon. So we did see a lot of benefits that were helping our margins overall.

And now to your question around manufacturing. Yes, manufacturing, we had a strong quarter overall. We did headline the turkey manufacturing, which was a very good performance as we saw it to Paul's point, very good growing conditions, strong manufacturing performance across our turkey facilities. But we had a good manufacturing quarter overall. And then beyond those business-driven results in the quarter, we did see a benefit of a discrete gain on the rabbi trust. But that was not the main driver of the performance. It truly was the business.

So with all of that said, one of the reasons we feel good about the quarter is it was a challenging environment. The consumer is what I would describe as cautious still. We did talk about those known pressures last quarter around logistics, and that was a significant year-over-year headwind, although we did navigate it a little bit better than we had planned, which helped us. And then on top of all of that, the significant new headwind that popped up midway through the quarter was rising fuel costs. So with all of that said, the second quarter exceeded our expectations and importantly, gives us increased confidence in achieving our full year range.

Okay. Paul, maybe as a follow-up, just to drill in a little bit on the inventory rebalancing. I mean this has historically been something that has happened with Hormel over the years. Just curious kind of how we should think about the potential impact of that discrete item in 3Q, both from a sales and margin perspective, again, as we kind of try to think about the EPS impact.

And in light of that, I know you called out a bunch of incremental headwinds maybe into 3Q. One area where we've gotten some questions has been around pork bellies, which have actually flipped, I think, deflationary, and I know there's a bit of timing lag in the flow-through, but maybe you can talk about just what you're seeing within the pork complex. I know there's some puts and takes there from a headwind and tailwind perspective.

Thanks, Peter, for the question. A lot of thoughts to unpack there. I'll try to go through it all. But I would characterize the inventory rebalancing as a really proactive step to better align our inventory levels across certain areas of the portfolio, like I said. I mean I want to get some props to transform and modernize work that we've done that has enhanced our Hormel production systems and how we operate our plants more efficiently. We've also taken this integrated business planning journey and have improved that over the past 6 months. And so our visibility to some inventory has really improved, and we've identified these opportunities to rebalance some of our inventory.

We do expect this to have a short-term impact, as you noted, with lower plant utilization, mainly in Q3. But I do want to just emphasize, it's not wide scaling. It's really certain ambient products with longer shelf life. And just think of the center of the store, canned items and SKIPPY to be kind of more precise. But as I said in the prepared remarks, these are targeted actions, which we expect to position us better going forward on the inventory balancing.

Regarding your pork bellies question, I will say that's all embedded into our guide. As you know, they are lower right now. But depending on who you listen to and what you see in forecast, there's a wide range of elements here and what's going to happen over the next 6 to 8 weeks. And so we're kind of in a wait and see model there in terms of where we are at. But we do have in our guide that we expect to be closer to the earlier part of -- or closer to last year in terms of the second half than where it's at in the present day market.

Your next question comes from Max Gumport with BNP.

So it sounds like you've got higher logistics costs. You've got the 3Q impact coming from lower plant utilization. You had fuel costs ramp up in the middle of the quarter. Your tax rate is now tracking towards the higher end of the range. So headwinds that you didn't foresee at the beginning of the fiscal year. But clearly, you're off to a great start for the first 2 quarters, and you're now like you're on track towards the upper end of the profit range. Can you just talk through a bit how much of this is maybe some cushion and conservatism in the initial outlook you provided versus how much is coming from things really operating much better than expected, whether it's the turkey network or other helps to profit that you are seeing?

Sure, Max. This is Jeff. I mean I think we talked to you even back when John and I were -- had our first call in these roles about a mentality toward, look, we know we need to set realistic plans and deliver those plans. It's always a bit of a balance between you want to stretch some. So the team is reaching towards a somewhat aggressive goal. On the other hand, you want it to be realistic. And so we talked even on that call about that the realistic timing over the long run in this company should be our algorithm. It should be the 2% to 3% top line, the 5% to 7% bottom line. And so indeed, when we came out with our plan for this year, it encompass those ranges, actually it was maybe slightly on the higher side for the bottom line, making up for some of the onetime things we had last year.

So as the years played out, I mean, for the first 2 quarters on the bottom line, we have indeed been a little bit ahead of what we had initially anticipated. And yes, we think that's been almost all performance base. We're enjoying some strong momentum still on the sales side. We had a chance with a new year to kind of reassess where do we want to put our marketing and trade push and we're able to push it towards higher margin items. We have the benefit of the SG&A items that we've talked about that we said, hey, look, we're doing those at the end of the fiscal year, if you will, but they really didn't even kick in until the beginning of the calendar year. So that, you started seeing more in Q2.

And so overall, I think it's been mostly performance-based. We probably did start -- we are going to start from a more -- somewhat more conservative standpoint. We view it as much more important to deliver performance than to promise performance.

Yes. I think that's a very prudent position to take. And then just a follow-up on 2 of the discrete items you've called out and just hoping for some quantification. So first, on the turkey network benefits that you're seeing. Can you quantify just roughly how much a help that was to profit in 2Q? And then what's embedded in your second half forecast? It sounds like maybe a reversion given that was partially helped by weather. And then on the lower plant utilization that you expect to see in 3Q, can you just quantify how large of an impact that is to profit? I'll leave it there.

Yes, Max, this is Paul. We're not going to quantify those dollar amounts. As you noted, the turkey manufacturing network did help us here in Q3 driven by weather and a lot of good performance as well. Wait-and-see attitude on that in terms of what happens in Q3 and Q4. And the inventory rebalancing, to what I said earlier, there was an impact here in Q3. It's embedded within our guide. We think that guide reflects the risks and opportunities in today's environment.

Your next question comes from Michael Lavery with Piper Sandler.

Just wanted to unpack foodservice a little bit. Traffic is obviously down pretty broadly, but you had volumes up. How much is channel mix share gains? Maybe can you just help us understand what some of the key drivers are there?

Michael, this is John. Thank you for the question. Yes. I mean we feel good about our food service business. I will say that the traffic remains challenged in many parts of the away-from-home channels and our business has remained quite resilient despite that traffic softness, putting up the 7% sales growth with some volume growth as well is a good quarter for us.

If you look at the environment, kind of how we approach foodservice, we've talked about this before, but our direct sales team who worked very closely with our operator partners, really what I would call in collaboration and problem-solving mode allows us to build business and gain business even when traffic is down. And that can take the form of helping solve problems with kitchen shortcuts, labor savings, it can take the form of affordable options that help control prices on the menu, and it still takes the form of innovation. And I mentioned in my earlier remarks, the Calabrian pizza toppings, which we are executing across both pepperoni and sausage, right, that's an example of bringing news to an operator to drive traffic and actually drive interest in the menu.

So that partnership we have in the kitchens with the operators and foodservice and our direct sales team truly does allow us to continue to build our business even when our operator partners are challenged. And so part of it is that. And then the other part to your point is we do have very broad-based channel coverage. And so when we see pockets of growth, we can redirect our resources to the places where we see opportunity or whether that's commercial or noncommercial, whether it's down the street or it's national chain, we do have flexibility to flex where the growth and pockets of growth are happening from a channel perspective, too.

So we continue to be confident in our foodservice team and their ability to execute and perform, deliver results. Obviously, to Paul's point, if we were to see some tailwinds behind the foodservice traffic across channels, that would be some upside for us. But right now, we're planning to deliver with the environment we're operating within.

Okay. That's helpful. And just a follow-up on guidance. I know a lot of it has been covered pretty well. But when you laid out some of these key factors for 3Q, it sounds like the inventory rebalancing should largely or maybe nearly completely be done in the third quarter. But you also cited the full quarter of higher fuel pressure.

I guess just looking ahead to 4Q, obviously, you expect a rebound in the kind of entirety or very close to it of the second half's growth to come there. Is your operating assumption relief on fuel cost pressure? Or how do you think about kind of maybe just what's closer to the end of the year and some of the assumptions there?

Sure, this is Jeff. I'll be happy to answer that. I mean, really, Q4 will be benefited by -- first of all, we had some onetime events last year in Q4 that we're certainly hoping are not going to repeat. Secondly, we feel that the overall momentum of the business should be able to shine through better during that time frame. And then third, we do feel there will be somewhat less impact maybe from all 3 of those factors from fuel, from the operational slowdowns and from the commodity markets. But we're not banking on a huge improvement in that baked in the number. But one way or the other, yes. I mean by holding our range, we're clearly signaling that we expect a double-digit bottom line increase in Q4.

Your next question comes from Ben Theurer with Barclays.

This is Ryan on for Ben today. So first, you called out earlier in your remarks some structural weakness in certain retail brands and categories. Can you expand a little bit on the puts and takes of how that's impacting your retail results, especially in context of the manufacturing gains and the other benefits you've talked about?

Yes, sure, sure. Thanks, Ryan, for the question. So we had another quarter of consumption growth in total on retail. And I mentioned we were up over 1% in dollar consumption. That was headlined by 3% growth across our priority brands in total. So we feel good about that. That being said, to get -- clicking on all cylinders in retail, there are a couple of businesses that we are dialed in on focused improving performance. Planters is one of those businesses. I would say, Planters didn't fully meet our expectations for the quarter. And while peanuts are performing well, some of the more expensive nut types like cashews have not been performing as well. We mentioned that dynamic last quarter that consumers have been trading out of cashews, which saw some significant price increases precipitated by commodity inflation over the past year.

And so we're dialing in, in terms of our overall plans with Planters. A couple of things to note. We continue to invest in the brand and our innovation, as we've talked about previously, but we are adjusting aggressively our go-to-market plans to take advantage of our broad portfolio. We feel very good about the franchise in total, but we need to adjust our plans.

And so I'll just call out 2 specific enterprise focus areas, where we're dialing in to strengthen performance on Planters. One is revenue growth management work. So we are enhancing promotions where warranted, getting very dialed in through data and analytics on that as well as developing new pack size strategies, which should be helpful for us to manage, again, those nut type and portfolio dynamics. And then the second area, a big focus for us is digital investment where we're dialing into lower funnel tactics, including investing into enhanced capabilities and efforts in e-commerce.

So we continue to love the Planters business, the macro opportunity around substantial snacking. But certainly, there has been some volatility across the portfolio driven by commodity dynamics. And so we're dialing up our game to address that.

And then the second business I would call out is SKIPPY. So SKIPPY had a softer first half of the year in terms of consumption. You'll recall that at the very end of last year, we announced that we had a fire at our Little Rock facility. We rebounded from that fire very quickly, went back into full supply, but we did make a decision in the immediate aftermath of the fire to be conservative with our customers and pull some first half promotions.

And so we've been working our way through some darkness in terms of promotions. We are now fully back in business. The back half is loaded up or back on the front foot with SKIPPY. And in fact, the latest 4 weeks of consumption data, which we just saw, which are now bringing us into Q3 show a significant improvement in SKIPPY's consumption. So we feel good about that. We are confident in our ability to continue to drive demand on the business, and we feel very good overall about the execution and supply chain behind that.

And a quick follow-up slightly related to that. You talked about last quarter that you expect higher marketing expenses and investments on the year. But again this quarter, it was a touch lower compared to last year. So are you expecting then a pretty big step-up in marketing expenses in the back half, especially as some of these brands try to come back online?

Yes. Good question. So what I would say is, yes, the second quarter, we did spend a little bit less that was primarily driven by a shift of timing of events in our international business. Our focus with our advertising investment continues to be to focus on our priority brands in retail. And so if you think about it from a mix perspective, if you think about it from a consumer opportunity perspective and where we have the strongest, clearest demonstrated ROIs and how we're focusing our investments in the back half, we do, in total, for the full year, still expect to deliver higher spending in terms of year-over-year versus prior year in advertising, so that will play through in the back half in our plans.

That being said, we also, several months ago, announced that we had brought a new enterprise-wide Chief Marketing Officer into the organization. He now has a few months under his belt, it's been very helpful for him to kind of identify some of the spending opportunities we have to get even more out of our marketing investments. So we're excited about the plans we have in the back half to drive those brands and businesses with even higher return on investment.

[Operator Instructions] Your next question comes from Heather Jones with Heather Jones Research.

I just wanted to go back to a comment that you made on bellies and just, again, wanting to make sure I'm interpreting this correctly. It sounds like your second half outlook assumes relatively flat year-on-year with fiscal '25? And if that's correct, when you're saying you're tracking towards the upper half of your guidance, that assumes the flat year-on-year with bellies. Did I understand you correctly?

Yes, Heather. You heard that exactly right.

There are no further questions at this time. I will now turn the call over to Jeff Ettinger for closing remarks.

Well, we really appreciate everyone's questions and for your engagement today. I'll just close the call by bringing everything back to what we heard throughout the call. We delivered a strong second quarter with growth from each segment and support from our supply chain. We have taken meaningful actions to strengthen the business, simplifying where needed, improving how we operate and sharpening our focus, and we are executing with discipline on pricing, cost and how we prioritize. That's what's been driving the performance you're seeing today, and we think it's positioning us well for what's ahead. Thank you again for your time. Have a great day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

Good morning, ladies and gentlemen, and welcome to the Hormel Foods Corporation First Quarter Earnings Conference Call. [Operator Instructions]. This call is being recorded on Thursday, February 26, 2026. I would now like to hand the conference over to [indiscernible].

Good morning. Welcome to the Hormel Foods Conference Call for the First Quarter of Fiscal 2026.

We released results this morning before the market opened. If you did not receive a copy of the release, you can find it on our website hormelfoods.com under the Investors section, along with supplemental slide materials.

On our call today is Jeff Ettinger, Interim Chief Executive Officer; John Ghingo, President; and Paul Kuehneman, Interim Chief Financial Officer and Controller. Jeff, John and Paul will review the company's fiscal 2026 first quarter results and provide a perspective on the remainder of the year. We will conclude with the Q&A portion of the call.

[Operator Instructions]. At the conclusion of this morning's call, a webcast replay will be posted to the Investors section of our website and archived for 1 year. Before we get started this morning, I'd like to reference our safe harbor statement.

Some of the comments we make today will be forward-looking, and actual results may differ materially from those expressed in or implied by the statements we will be making. Please refer to our most recent annual report, Form 10-K and quarterly reports on Form 10-Q, which can be accessed on our website under the Investors section. Additionally, please note, we will be discussing certain non-GAAP financial measures this morning. Management believes that doing so provides investors with a better understanding of the company's underlying operating performance. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Further information about our non-GAAP financial measures, including comparability items and reconciliations are detailed in our press release, which can be accessed on our website.

I will now turn the call over to Jeff Ettinger.

Thank you, [indiscernible], and good morning, everyone. We are pleased to report solid results for the first quarter of fiscal 2026.

We delivered organic net sales growth of 2%, which marks our fifth consecutive quarter of organic net sales growth. We also achieved adjusted diluted earnings per share of $0.34. This outcome was driven by the strength of our protein-centric portfolio that continues to resonate with consumers and operators. A highlight of the quarter was the results we delivered in both our Foodservice and International segments, both with high single-digit organic net sales growth, coupled with impressive segment profit growth. This strong performance was partially offset by the decline in our retail segment. We will review segment performances in greater detail shortly.

On our fourth quarter call, I outlined the key actions we are taking to strengthen our business and position Hormel Foods for both top line and bottom line growth in fiscal 2026. We have started to see the benefit of these efforts. Our protein-centric portfolio continues to demonstrate its advantage. In response to last year's persistent inflation in key commodity inputs, our pricing is now implemented as we have begun the second quarter.

Our Transform and Modernize initiative remains beneficial and our restructuring program is progressing as planned. The financial benefits from this program will start to materialize more meaningfully in the second quarter.

Finally, we continue to enhance collaboration across the organization. Overall, the solid start to fiscal 2026 gives us conviction as we look ahead. For Q2, we expect to deliver another quarter of top line growth and adjusted diluted EPS that is in the range of flat to slightly up compared to last year. For the full year, we have also reaffirmed our organic net sales and adjusted diluted earnings per share guidance. Paul will discuss our financial results and guidance in more detail.

Our success will be fueled by focusing on our core strength in protein solutions while making the operational improvements necessary to drive long-term value creation.

Before I hand the call over to John, I wanted to take a moment to recap our recently announced definitive agreement to sell our whole bird turkey business to Life Science Innovations. This transaction supports our goal of reducing our exposure to volatile commodity-driven businesses and sharpening our focus on our value-added protein portfolio. I also want to be clear about what this transaction does and does not include.

The sale involves the hand side of our turkey complex, which are the female birds that you would typically enjoy during the holidays. Included with this transaction is our Mail Rose, Minnesota whole bird production facility; our Swan ville, Minnesota feed mill; and associated transportation assets. LSI will also assume supply contracts with dedicated third-party hen growers. The transaction is expected to close by the end of our fiscal Q2. So now let me emphasize what this transaction does not include. The sale will not affect our value-added turkey products, and we will continue to own and use the Jennie-O brand name. Value-added turkey will remain a strategic and important part of our growth story. In addition, Hormel Foods will retain the right and ability to sell our Jennie-O oven-ready whole birds and turkey breast. We will continue to own and operate all of our other turkey plants, feed mills, transportation assets and turkey barns associated with raising and processing the male or Tom turkeys for our Jennie-O value-added turkey products.

Another point I wanted to make clear is that the majority of Jennie-O's whole bird sales for the 2026 holiday season will remain part of our reported results in fiscal 2026 under the agreement, LSI will provide co-manufacturing services to Hormel through the end of fiscal 2026 to ensure uninterrupted fulfillment of customer orders during the transition.

This strategic move creates a more focused Turkey portfolio that enables increased investment in the value-added aspects of our Jennie-O business, where we can drive substantial margin expansion. We are committed to working with LSI to ensure a smooth transition for our team members, customers, consumers and suppliers.

We began the year with strong execution from our team, and I am confident in our near- and long-term profitable growth opportunities. We are well positioned to continue delivering sustainable value. At the same time, we know there is more work ahead, and we are committed to executing with urgency and precision. With that, I will turn the call over to John.

Thank you, Jeff, and good morning, everyone. We had an encouraging start to fiscal 2026 with strong performance in both our Foodservice and International segments. This demonstrates the strength of our protein-centric portfolio and our strategic positioning, both at home and away from home across all dayparts. These results were achieved in a challenging consumer environment marked by industry-wide limited retail consumption growth and notable headwinds in Foodservice channels, as operators and consumers remain cautious.

In this backdrop, we are committed to creating and marketing compelling branded offerings for our consumers and a solutions-based portfolio that makes protein easy for our operators.

Now let me go into the details of our segment performance, starting with Retail. First quarter organic volumes and organic net sales for the Retail segment declined. While our branded portfolio performed fairly well, top line was meaningfully impacted by our strategic exit from select noncore private label snacking items.

That said, Sercana's latest 13-week data ending January 25 showed total Hormel dollar sales were up over 2%, indicating that our portfolio continues to resonate in today's consumer environment. Several of our priority brands delivered year-over-year dollar sales consumption growth, including Jennie-O ground turkey, planter snack nuts gatherings party trays, Applegate meats and Hormel entrees, among others. This adds yet another quarter to a long-running pattern of consistent dollar consumption growth across our priority brands.

However, even with this encouraging consumption data, reported top line and profitability remained challenged in Retail in the first quarter. In addition to lower net sales, profitability was further pressured by expected increases in raw material costs and unexpected increases in logistics expenses.

As a reminder, the second wave of retail pricing went into effect at the beginning of Q2, aimed at offsetting some of the cost pressures. Revitalizing the Retail segment remains a major focus, and we have a solid foundation with leading brands and protein-centric offerings to support our plan. We have meaningful strategic actions underway to strengthen both top line performance and profitability, including investments in a number of critical capabilities needed to win in today's retail and consumer landscape.

Our Foodservice segment performed well in the quarter, and this marked the segment's tenth consecutive quarter of organic net sales growth. This growth continues to be broad-based across channels and was driven by strong performance from premium prepared proteins and branded pepperoni.

Our solutions-based portfolio continues to add value in a challenging overall foodservice environment where operators need solutions that help them deliver high-quality, delicious offerings with ease. It's no surprise that brands such as Austin Blues smoke meats, Hormel Fire Braised meats and Hormel Natural Choice meats delivered strong volume and net sales growth in the quarter. The segment profit growth was equally impressive as our pricing continues to align with market movements.

Our International segment benefited from all 3 of our go-to-market models. Net sales growth in the segment was driven by our multinational businesses and branded exports, led once again by SPAM luncheon meat. We delivered strong segment profit growth for the International segment this quarter reflecting the importance of our balanced model.

When we look beyond segment performance, the larger trends in consumer behavior and protein demand strongly affirm both where we stand today and where we're going. I spoke to this extensively at the CAGNY conference last week. Our path forward continues to start with the consumer, and it's anchored in a unique position we've built in the protein space over the years. As we highlighted at CAGNY, protein isn't the passing trend, it's an enduring long-term movement.

As we follow the consumer and sharpen our focus on protein-led growth, our strategy must also evolve. We are refreshing our purpose and mission to better reflect our direction and ambition. We have also rolled out 7 strategic priorities that are guiding our work, and I'd like to take a few minutes to tell you how each of these tied to our first quarter results.

As we look at strengthening our protein-powered brands, the Planters brand delivered both consumption and net sales growth in the first quarter. We are leaning into the inherent power of nuts with sharper positioning and a stronger media campaign. This is an important evolution for this iconic brand. We launched both the can and single-serve pouch in the Philippines, providing the familiar value and convenience of SPAM now in a highly penetrated protein format, chicken.

We are also building enterprise-wide growth platforms that leverage our scale across markets and channels. Our Here for the Snacks campaign is a great example of this type of enterprise thinking. Now in its second year, this retail portfolio event brought together snacking solutions from priority brands, including ARDS, Hormel Chili, Hormel Gatherings, Hormel Pepperoni, Planters and Wholly Guacamole, all ahead of the big These efforts create meaningful lifts.

Hormel Gatherings, for example, delivered double-digit volume and dollar consumption growth in the latest 4-week period. Our renewed commitment to origination is equally important. Innovation allows us to solve real pain points and extend it to new categories in eating occasions. A strong example is our Flash 180 chicken platform. After the strong performance of Flash 180 chicken breast, operators signaled demand for a high-quality crispy chicken solution. And with chicken tenders appearing on roughly 40% of menus, there was a clear opportunity to broaden our lineup.

Flash 180 tenders launched late last fiscal year and in the first quarter are already demonstrating adoption rates consistent with some of our successful historical foodservice launches. A second innovation is Hormel Black Label oven-ready bacon offering true convenience and driving increased household usage of bacon. Our team is focused on expanding distribution and building trial and this convenient, mess-free, disposable tray is already resonating strongly with younger consumers and 60% of its sales are being generated through e-commerce.

All of this growth requires a strong foundation. Through our Transform and Modernize initiative, we continue to strengthen our supply chain end to end. In the first quarter, the Hormel production system progressed beyond its foundational phase, and the facilities that have fully implemented the model are now driving continuous improvement, increasing efficiency and are freeing up capacity on our core manufacturing lines.

At the same time, we are simplifying the company. In the first quarter, we finalized a new strategic partnership for the Justin's branded business. This partnership better aligns the business with an ownership model that can appropriately support and resource the Justin's growth plan. Regarding the pending whole bird divestiture that Jeff covered, I'll simply add how energized I am about the opportunity this creates.

This move allows us to sharpen our focus and accelerate growth in our value-added Jennie-O Turkey business, an area where we're already seeing strong momentum. For example, our Jennie-O ground turkey dollar sales consumption was up double digits in the first quarter, and the brand is winning both in-store and through e-commerce with highly relevant occasion-based marketing. We're also modernizing our technology and data backbone so the organization can move faster, make better decisions and innovate more effectively.

The team made great progress in the first quarter, completing another phase of our order-to-cash modernization and bringing us closer to retiring our legacy system. In addition, we are also leveraging technology more to drive our growth agenda. We've incorporated weather-driven demand intelligence into our advertising decisions for Hormel Chili, allowing us to better align media spending with consumer buying patterns, and this targeted approach is already delivering stronger returns on investment.

Our final priority is all about acceleration through our people, capabilities and our culture. After more than 130 years of operating, Hormel has built a rich culture and has developed strong institutional knowledge, especially as it relates to our understanding of proteins and how to solve pain points for consumers, customers and operators. The success that Hormel has enjoyed would not be possible without our people and culture.

We are continuing to evolve as a company for the next generation of consumers. And what you've seen more recently is that we are complementing our homegrown strength by bringing in external leaders with world-class capabilities in areas such as marketing, analytics, technology, e-commerce and supply chain transformation. This blended leadership team truly represents the best of both worlds and their collective strength is what enables us to bring our purpose and strategic imperatives to life.

With that said, I would like to highlight a few of our recent leadership appointments. We took an important step towards enterprise alignment with the recent creation of a new role, Group Vice President of Enterprise Business Performance, and have appointed Jeff Baker to lead this critical function. With more than 35 years of experience across many parts of Hormel Foods, Jeff brings unparalleled company knowledge and a proven track record of delivering results.

Jeff is working across all business units and our supply chain to strengthen decision-making and to ensure strong execution. We recently appointed Natasha Walsh as our new Group Vice President of Retail Sales. Throughout her more than 25 years with Hormel Foods, Natasha has distinguished herself as a strategic leader who understands every dimension of our business. Her extensive experience, unmatched knowledge of our brands and channels and the strong trusted relationships she has built with customers across the industry make her an exceptional choice for [indiscernible] including a multibillion-dollar portfolio.

In just a few weeks, I've been energized by the insights that Jason has already brought to the leadership team and the marketing organization. And finally, I wanted to introduce Dominic Burelle, who officially joined us this week as Executive Vice President of Retail. He brings a strong history of driving consumer-led growth within mature legacy brands and categories and has a deep understanding of how to deliver results by staying closely connected to consumers, fostering strong customer relationships and guiding teams with clear strategic direction.

Dominic is the right leader to build on the team's foundation, and many of you will have the opportunity to meet him as he begins engaging with our teams, customers and the investment community. When you put all focus areas together, you start to see a very clear picture of where we are headed. We're aligning our brands and platforms to the biggest consumer trends, modernizing the systems and structure that power our business and reinforcing our culture with the talent and capabilities to win. That's the journey we're on, and it's one that positions us exceptionally well for long-term sustainable profitable growth.

With that context on our strategic direction, I will turn the call over to Paul to review our first quarter financial results in more detail and discuss our 2026 guidance.

[indiscernible] organic net sales increase compared to the prior year and our fifth consecutive quarter of organic net sales growth. Our Foodservice and International segments led the company's organic net sales growth and were partially offset by the decline in the Retail segment. Gross profit continued to be hampered in the first quarter with top line growth more than offset by higher input costs and higher-than-expected logistics expenses.

As expected, commodity input costs, mainly for beef, pork trim and nuts were a headwind in the first quarter. For context, beef remained a significant inflationary pressure across the industry and pork trim increased 12% compared to last year. While remaining high from a historical perspective, we did see some relief on bellies. We are still expecting to see a modest improvement in most commodity markets in the back half of the fiscal year.

During the first quarter, we observed freight capacity tightening driven by severe winter weather and industry dynamics. This has created modest upward pressure on transportation costs. We continue to monitor this to assess whether these pressures persist for the remainder of the year.

For the first quarter of fiscal 2026, adjusted SG&A and adjusted SG&A as a percent of net sales were comparable to the prior year. The reduction in marketing and advertising expenses was due to the timing of investments and offset by strategic investments, in technology, people and brands. Adjusted operating income for the first quarter was $247 million and adjusted operating margin was 8.2%.

The effective tax rate for the first quarter of 2026 was 22.4%. Our solid results in the first quarter led to diluted earnings per share of $0.33 and adjusted diluted earnings per share of $0.34. We continue to maintain a position of strong liquidity, supported by continued improvements in operating cash flow. Cash flow from operations was $349 million, up $26 million from last quarter. Capital expenditures were $69 million, with the largest project this quarter related to the Ambient meat snacking facility in Jajang China and continued investments in data and technology.

We still expect the capital expenditures for fiscal 2026 to be in the range of $260 million to $290 million. Finally, we remain committed to the dividend, and we are proud of our dividend aristocrat status. We paid our 390th consecutive quarterly dividend, returning approximately $160 million to stockholders during the quarter through dividends. Turning now to guidance. We are reiterating our adjusted full year fiscal 2026 guidance.

We continue to expect organic net sales growth of 1% to 4%. As John discussed, we believe our protein-centric portfolio puts us in an advantaged strategic position going forward. In fiscal 2026, we continue to expect adjusted operating income growth of 4% to 10% and adjusted diluted earnings per share to be in the range of $1.43 to $1.51 per share.

Regarding the pending Whole Bird Turkey transaction, we expect it to have a minimal impact on our adjusted financials in fiscal 2026. The majority of Whole Bird Turkey sales for fiscal 2026 will remain part of our reported results. We currently believe the impact to net sales in our fiscal 2026 results will be reduced by approximately $50 million. We expect the larger impact of this divestiture to be reflected in our results in 2027.

On an annualized basis, this business typically generated net sales between $200 million and $275 million and has exhibited high volatility and low margins. Additional adjustments to our GAAP guidance will be provided after the close of the transaction, which we expect to occur by the end of the second quarter.

Turning to key input cost assumptions and our outlook. We expect overall commodity cost to ease somewhat in the back half of fiscal 2026. Specifically, we expect pork input costs to decline compared to fiscal 2025, but still remain above the 5-year average. Beef costs remain high and are expected to be a headwind throughout fiscal 2026, and nut costs are anticipated to be elevated from the prior year.

Gross margin expansion is expected to be driven by a variety of factors, including pricing benefits, mix improvements and productivity gains from our Transform and Modernize initiative.

To reinforce Jeff's earlier commentary for Q2, we expect to deliver another quarter of top line growth and adjusted diluted earnings per share that is in the range of flat to slightly up compared to last year. We expect sequential improvement from the first quarter, benefiting from a full quarter of our restructuring actions and the second wave of Retail pricing now implemented. This range also considers pressures from commodity input costs and elevated logistics expenses we saw arise in the latter half of the first quarter.

To conclude our remarks, we are encouraged with the early success to start the year, and we remain confident in the plan we are executing to achieve our reaffirmed adjusted fiscal 2026 results.

With that, I will turn the call over to the operator to begin our Q&A portion of the call.

[Operator Instructions]. Your first question comes from Tom with JPMorgan.

Maybe we could just start out on 2Q? You noted the expectation for EPS to be flat to slightly up year-over-year. Could we maybe unpack this outlook segment level expectations for instance or maybe when discussing the logistics headwinds, any details on kind of where this is coming from and when it might start to taper off?

Yes. Thanks for the question, Tom. This is Jeff. Let me provide some added color on Paul's remarks, about Q2 a couple of minutes ago. So as we were heading into this year after a year of solid top line growth, but challenged bottom line results in fiscal '25, we tried to make it clear, both to The Street and to our team that our goal for fiscal '26 was to return to bottom line growth consistent with our long-term algorithm.

We also said that this recovery would likely come sequentially over the course of the year. And we're definitely pleased that our Q1 adjusted EPS turned out a little better than the minus $0.02 to $0.04 we had talked about on the last call, but we also recognize that the adjusted EPS was still $0.01 below last year. Heading into Q2, our expectation is continued sequential improvement. We should reap the benefits of the completion of the second wave of Retail pricing, which was aimed at offsetting some of the cost pressures we've talked about for the last several quarters.

And on top of that, we will now start having full quarters of benefit from our SG&A actions. But as you pointed out in your question, we are carefully watching the more challenging freight cost environment we referenced in our comments. And at this point, I mean, they've been going on for a couple of months, and it's kind of too early to tell whether they're a seasonal issue or whether there's something that will be with us for more of the year.

So all told, at this point, we believe we remain on a path to generate the sequential but modest bottom line improvement in Q2, hence, the comments that both Paul and I made about seeing adjusted EPS coming in at flat to slightly above last year, while we will continue to generate top line growth. And we do remain confident in the guidance we've provided for the full year.

Okay. Also wanted to just ask on the whole turkey divestiture. Maybe, one, just any added details on kind of the rationale? It was helpful to get some of the commentary about longer-term margin benefit and the annualized sales expectations, but also kind of where we sit, I guess, when looking at the volatility of this business is -- should we look at 2026 as being perhaps a more favorable year for the Whole Turkey business? Yes, just any added detail there. .

Yes. This is Jeff again. Let me talk about more the kind of the financial side of it, but I want I'd like John to be able to comment on where we saw this fitting in terms of our long-term view of this consumer landscape. As Paul pointed out in his comments, we not only said that, hey, we think the net sales impact for fiscal '26 will be roughly $50 million. We have most of our Whole Turkey sales booked already, and we have custom manufacturing arrangements with LSI to fulfill those.

And then Paul gave you a kind of a generalized typical range of $200 million to $275 million. Obviously, that's in 2027, it will depend on how many Turkey LSI decides to run through the plant. It will depend on what the pricing is and so forth. But that gives you an idea of what typically the sales of whole birds and bone and breast from the hen complex were in Hormel's results.

In terms of the bottom line, we've said it's highly volatile, and it's low margin. We have not previously provided specific margin breakout for the whole bird piece of the business. What we can tell you is that in a typical year, it is significantly dilutive to retail margins. There have been isolated years of more meaningful profitability, but those are outliers.

John, do you want to comment on the more consumer side of our thinking?

And just to touch a little bit on the strategic rationale that part of your question. We continue to see an opportunity with turkey to accelerate our efforts, but really against, what I'll call, the value-added consumer opportunity. And if you look at turkey, it is on trend in so many ways with consumers and with our operator partners in foodservice. So this transaction will really allow us to increase our focus and accelerate the efforts on that part of the business, in particular, from a retail perspective or thriving ground turkey business, the turkey breast business, other value-added formats.

These are all consumer opportunities. We continue to drive really strong growth behind those platforms. You can see the ground turkey business just this recent quarter was up over 15% for us in dollar consumption. So we want to continue to drive that.

When I talk about food service, turkey has become a critical part of our solution set for our operator partners across channels and foodservice. If you think about formats like premium oven-roasted slice Turkey, which we leverage across noncommercial and commercial food service outlets, it's really operators looking to deliver premium experience with less labor or another example of where we have really plugged turkey in quite well is in the K-12 segment in schools.

And if you think about really interesting alternatives for that K-12 segment where we bring flavor and exciting formats to turkey through our foodservice business things like turkey taco meat, turkey meatballs turkey nuggets, there's just a lot of opportunity there for the poultry segment, and our leadership position in Turkey gives us a lot of room.

So whether retail or foodservice accelerating -- increasing our focus, accelerating our efforts by -- through this transaction, what that looks like is really spending more of our time, the focus of our team, our resources, our energy and conversations with our customers really driving against the value-added parts of the business and not as much on, what I would call, the whole bird part of the business, which really is more commodity-driven more relying on holiday demand. But certainly, to your point, on volatility, very subject to those commodity fluctuations year-to-year.

Your next call comes from Leah with Goldman Sachs.

I wanted to ask about the retail segment as it was a little light versus our expectations. And I know you called out some logistics headwinds, but we also still haven't seeing the full benefit of your recent pricing actions. So seeing if you could provide more detail on the key puts and takes for the Retail segment in the quarter? And then how we should think about them as we move throughout the year?

Great. Leah, it's John. I'll take that question. Obviously, a very good question.

For me to talk about retail, what I'll do is I'll start up at the top line and kind of work my way down to margins. I would say, overall, for Retail, we feel good about the consumer takeaway we're seeing across our branded portfolio. Despite what is a choppy environment, a strange consumer backdrop, we continue to feel good about the consumption on our branded portfolio. That being said, in the quarter, Retail top line net sales performance was down 2%.

That year-over-year decline was driven by a strategic exit of certain private label nut items, the branded portfolio, on the other hand, continues to see fairly strong consumer takeaway. I mentioned in my remarks that Hormel's total dollar consumption was plus 2% on the quarter in the latest 13 weeks of data. In fact, our priority brands drove that. They were up 3% on the quarter in terms of dollar consumption growth driven by Jennie-O, Planters, our Mexican brands, pretty broad-based growth, our Hormel Gatherings, Applegate continued to grow.

So a nice cross-section of our priority brands really driving consumption growth. which I think does speak to the relevance of our protein-centric portfolio in this environment. That being said, profitability for the quarter, certainly below prior year. And if you kind of look at how things play out, a significant driver compared to prior year is certainly the commodities. And we're still experiencing the very high commodity markets that we saw soar on us late last year and those markets have us clearly facing increased COGS significantly above -- our COGS significantly above where they were prior year.

And as we mentioned on the call last quarter, we announced 2 waves of retail pricing. The first one took effect in Q1; and the second wave, the one that we announced later in Q4, we mentioned we wouldn't expect to see the benefits of that second wave of pricing until Q2. And so overall, the way I would describe the pricing is, the actions have been well accepted. The elasticities where we've implemented the pricing actions are generally playing out in line with our expectations at this point.

We will continue to get additional benefits from that second wave of pricing action in Q2 and beyond. And in general, on Retail to go to kind of the outlook part of your question, we're working on 3 primary aspects to improving our margins on that business. Pricing is one, as I mentioned, right, that's critical following the commodity increases we've seen. But our Transform and Modernize initiative is a second aspect.

We continue to drive productivity and efficiency across our entire supply chain. That work is ongoing and is very important. And then the third aspect of improving margins on the retail business is mix. And when I talk about distorting resources driving growth behind our priority brands, those are the businesses that tend to be margin favorable for us. So that's a part of it. But it also is a part of pulling back and at times exiting and walking away from certain businesses, which are in the lower margin part of our retail portfolio. And you continue to see us doing that as well.

So that's kind of the dynamics that they're playing out. What I will also say is in the first quarter, in addition to those high commodity markets, we began to experience unexpected increases in freight and logistics costs and that really popped up in the latter part of the first quarter. I'll ask Paul if you can comment a little bit, Paul, on what we're seeing unfold there.

Yes. Thanks, John. So we did see, as Jeff and John had pointed out, some significant tightening in the industry and specifically across the refrigerated sector in the back half of our first quarter. Spot rates began to increase as there were severe -- winter weather events and driver availability did tighten. These pressures have continued in early quarter too. And obviously, we're still seeing some severe weather events across the United States. So we're continuing to closely monitor these conditions surrounding the industry dynamics, such as carrier exits and driver storages as we head into quarter 2.

Your next call is from [ Ryan ] with Barclays.

This is Ryan on for Ben. So we want to look a little bit more at foodservice and understand. So volumes were essentially flat. And with that, are your pricing tools all implemented over in foodservice? I know there's a little bit of delay on the Retail, but want to understand the dynamic of how foodservice customers are responding to those price increases and what you're seeing from the top line and the margins there going forward?

Yes. Thank you for the question, [ Ryan ]. This is John. I'll take that. So we are very encouraged by the start to the year in our Foodservice segment. We did see that strong top line growth with 7% organic net sales growth, and that's 10 consecutive quarters, as we've mentioned in our prepared remarks. So the heart of our foodservice model, we think, is really a differentiated advantage model, which has allowed us to continue to drive top line growth in what is still, I'll say, a challenging foodservice environment overall.

We know traffic continues to be challenged in a number of the different aspects of foodservice. What we lean into there, the way we've been able to continue to drive the growth is 3 aspects, and one is our direct sales team. We feel like this is a real competitive advantage for us. Our team is out on the street, working with operators, working with our partners every day and figuring out how we can help them in the challenging environment, right? So that's a critical aspect.

The second piece is our portfolio of innovative solutions. We add value for the operators, and we do help them with pain points. We help them with efficiency. We help them with reducing labor. We help them get high-quality products on their menus in affordable ways. And so the solutions-based portfolio is important.

And then finally, the critical aspect is we have a very diversified channel set on our foodservice business. So even when overall, there are some headwinds in the industry, we can still work hard to find pockets of growth. which enable us to really sustain that. Now on a net sales basis, we were plus 7. Our volume came in flat, which obviously with prices going up with protein markets going up and prices flat volume delivery is a good delivery, I would say.

To your question on pricing, typically, there is a lag time on our food service. The prices will follow the markets. And as we talked about in Q4, we saw a pretty dramatic rate increases in the markets, and we knew we would take a little bit of time to catch up on that. First quarter, definitely, we did see our pricing coming back in line with the market movements which did help us on the margin side, recover what we had basically lost in Q4. So that is the heart of what kind of is going on in terms of foodservice, which is strong top line growth, pricing catching up with the markets that we saw explode on us late last year.

Your next question comes from Heather with Heather Jones Research.

I just was wondering, first, a detailed question, if you could give us a sense of how much of the volume decline in retail was related to this exit and it sounds like to a lesser degree, the deli? And how you all are thinking about that trajectory over the rest of the year?

Heather, yes, it's John. I'll take that question. So obviously, just stepping back on volume overall with rising protein markets, increasing prices, volume growth is more challenging. That said, we do feel good about flat volume delivery in foodservice. We feel good about a little bit of volume growth in international retail is clearly where we had our volume decline. And to answer your question, the way I would think about volume in the retail segment is really in 3 buckets.

The first bucket is what you're alluding to, which is the exit of that private label business, which was, let's say, a less strategic business for us, that was one of the drivers of the volume decline. But there are 2 other aspects I would touch on. The second one is we did have a couple of declines, I'll say, on acute businesses with some soft consumption, SKIPPY being one of the areas where we have some volume softness right now. So there was some volume softness on a couple of businesses, including SKIPPY.

And then the third one, maybe the most obvious, but certainly, all of the pricing in the portfolio and the elasticity dynamics around that pricing, which we expected, and as I mentioned, elasticities are playing out in line with our expectations, but there is some volume coming out as a result of the pricing actions overall across the portfolio.

So that said, looking forward, I do feel like we can continue to drive growth and volume growth on our Retail portfolio. If you look at our priority brands, even in the latest 13 weeks from a consumption standpoint, we do have volume growth in a number of spots on our priority brands, Planters, Hormel Gatherings, Applegate, our Mexican portfolio. So we are growing volumes in a number of places. We'll obviously continue to invest with consumers and drive increased volume in pockets. But the reality is, in this environment with pricing, there will be some throttling of that volume.

Okay. And my follow-up is just as you all taking a closer look at the business over these last few years -- I'm sorry, these last few months, when I look at the Retail segment profitability using just '25 has dropped roughly 1/3 since '21. Volumes are down some, but margins are down considerably. The foodservice piece has grown nicely. But just as you measure, as you've taken a look at the business, I was wondering if you could just sort of flush out for us like the opportunity to return to the margin levels we saw in the past? Are there any structural changes that are going to limit that ability? How much do you think it's related to company-specific execution issues? And just how you're thinking about maybe the next few years and what that retail business will look like?

Yes, sure. I'll comment a little bit on that, Heather, just to give you a little bit more depth around what I talked about earlier in Retail. Last week, I spoke extensively at the CAGNY conference about kind of our new lens on our opportunity as a company. And we believe we have a really strong opportunity with our brands and capabilities in the Retail segment to win with consumers.

We're in the process of pivoting our brands into some big consumer opportunity spaces, modernizing and refreshing our brands, modernizing our capabilities as a company. And I talked a lot about that in terms of some of the investments we're making in areas like data, technology, analytics, e-commerce. So there's a lot of pivot happening to make sure we can unlock those opportunities. But I will tell you, when I look at our portfolio and I look at our roster brands and what we call our top 8 priority brands, which I talked about at CAGNY, when I look at our next sources of growth, which are incredibly aligned with future consumer trends, we have a lot of opportunity to drive growth and profitable growth.

So the lens we brought to that was a consumer lens, but it certainly was also a financial and strategic lens to say, how do we make sure we're driving the parts of our portfolio where we have strategic advantage, where we have strong margins, where we have consumer opportunity so we can drive growth and favorable mix over time on the retail business and then the capability piece is what is it going to take to deliver all of that.

So we feel very good about the outlook for our retail business, our ability to do that over time. We feel like we're making the right investments now to continue to make that pivot.

Your next question comes from [ Chris ] with Bank of America.

It's [ Chris Downing ] on for Pete. Two quick ones on the Whole Bird business divestiture. One, how should we think about this transaction relative to the WholeStone Farms transition you went through in 2018 on the pork side? What would be some of the similarities and differences?

And two, can you remind us what percent of the legacy Jennie-O portfolio of Whole Birds was? I believe that last disclosure, it was around 20%, but I just wanted to double check that.

Chris, this is Jeff. I'll tackle this one. So I mean, I would look at the complex that Hormel ozone is differently than the pork complex. Hormel at its peak in the pork complex was like the #6 or #7 players. Another dynamic in it is in the upper Midwest, there are anticorporate farming laws that apply to beef and pork. And so Hormel never had a vertical operation here in the Upper Midwest. We did own farms at Mountain Prairie out in the Western area for a while and with Farmer John. But again, it was a small percentage of the business.

So I think in that case, the notion of having somebody else take over some of the deep verticality of that business made a lot of sense. On the Turkey side, Jennie-O has been the big player, 1 of the 2 or 3 big players in the industry for a long time. We think we are an effective low-cost producer. We have substantial assets that we are retaining indeed, we talk about selling the Melrose plant, but we're actually keeping plants in Barron, fairable Wilmar, Monovideo and Pelican Rapids.

So I think they're different. I mean the mentality of ultimately, a, there may be opportunities to get closer to the consumer and not be as vertical. It's a logical question. We did ultimately identify the whole bird business as being less strategic and more volatile and hence thought it was better owned, frankly, by LSI. But otherwise, no, we're committed to the Tom aspect of the business, and we think it gives us an important continuity of supply and cost advantage ultimately for those value-added products.

In terms of the percentage, I mean, I think we could follow up with you on that. I mean, I don't think you're way off, but it's at the $200 million to $275 million. I mean it's been a while since obviously, we reported Jennie-O as its own segment. but that gives you some ballpark.

Your next question comes from Rupesh with Oppenheimer.

So just going back to the full year guidance. So given your 2Q guide, it implies a pretty significant profit acceleration in the back half of your fiscal year. So just curious on your confidence in being able to drive that improvement as we get towards the back half of the year?

Thanks, Rupesh. This is Jeff again, I'll tackle that. And we're pleased to be off to the solid start that we've talked about today. We're happy with our fifth consecutive quarter of organic net sales growth and glad to be $0.02 ahead of our bottom line target after Q1. In light of the logistics cost trend, we think our confirmation of both our top and bottom line annual guidance range should be seen as a prudent yet confident sign. And we would remind you that as we head through the year, we're expecting sequential profit improvement and there's a number of levers or drivers to that.

We should see benefit from the pricing actions, we should continue to see T&M benefits, we will benefit from ongoing SG&A savings, we expect modest improvements in many of the commodity markets in the back half. And frankly, in Q4, we had some onetime discrete events that hurt us last year that we don't expect to happen again, obviously, and so that should be a benefit as well.

Great. And then maybe one follow-up question. Just on the retail segment. I know you've gotten a number of questions so far on the call. As we think out maybe the exit rate from a top line perspective, would you be -- would you expect to be closer to flat on the organic net sales line for Retail as you get towards the end of your fiscal year? Just trying to get a sense of the exit rate.

I mean for our segment detail guy in Retail, I think on net sales, we continue to -- you're right in terms of where the private label nuts business really has been and where it exists here for the first quarter. I do think that for volume, we expect modest declines just given the private label nuts and the elasticities related to pricing within the Retail segment. And as we stated back at the start of the fiscal year back in November, Retail for segment, we're going to have modest declines in volume with net sales in low single digits to flat, and that's where we kind of think we're still going to be.

[Operator Instructions]. Your next question comes from Pooran with Stephens.

I wanted to maybe start off with understanding what percent of your profits are now commodity? I think in your 2023 Investor Day, it was about 10%, but you've made some moves, you sold off Mountain Prairie. Now with the sale of commodity, I was just wondering how we should think of Hormel profits in terms of value-add and commodity?

Yes. This is Paul, I'll try to answer that, but we really don't track that answer specifically. This could be something that [ Florence ] and the IR team follow up with you later. Obviously, as you know, we have had declines here with the sale of Mountain Prairie and then the definitive agreement here with the Whole Bird Turkey operation, which will limit some of our commodity growth as well as what we went through with the reorganization and what we call Project Tower internally with looking at our Turkey operation in full and reducing some of the harvest levels a couple of years ago. So they can follow up with you more on that, but it definitely is down from where it was back in '23.

Okay. Appreciate the color there. I wanted to -- for my follow-up, I wanted to ask about whole bird, sorry to pile on here. But I know you had a procurement strategy for Jennie-O before where I believe you were an overall buyer of meat just given the prevalence of your ground turkey product. Does the sale of the whole bird business because in your prepared comments, you mentioned breast in there as well? Does this change your procurement strategy at all at Jennie-o?

This is Jeff. No, it really doesn't. I mean, the Tom complex, if you will, we mentioned the farms and feed mills and plants that we have related to that. But for many years, Jennie-O has also supplemented its own production with the purchase of certain raw materials that are key to many of our value-added items and that will continue. There is an aspect of the contract whereby we can get a small amount of some of the dark meat products from LSI on the hands that they bone out -- and so that would be 1 minor change, I guess, to the operation.

And I would just add also to what you heard in the call, we identified bone and breast as a product coming off of the hand. So that's not really breast me that's going into the value-added product coming off of Tom Turkey. So that is a finished good product that's coming off of a hen only.

That concludes our Q&A session. I will turn the call over to Jeff. Please go ahead.

Thank you very much. I appreciate everyone's questions today, and we thank you for joining us, particularly at this early hour. We are pleased with our solid start to fiscal 2026 and the momentum we are building across our business. The initiatives we have implemented are positioning our company for continued success and we look forward to updating you on our progress throughout the year. Thanks very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.

We're thrilled to welcome back the management team of Hormel and especially Interim CEO, Jeff Ettinger, whose very successful tenure as CEO from 2006 to 2016 included many CAGNY presentations. He just can't get enough. Please join me in thanking Jeff and everyone at Hormel for this morning's break. Hormel Foods is a global branded food company, centered on protein and built around a deep understanding of the consumer. They are building on an outstanding tradition of industry-leading, really world-leading corporate governance through disciplined thoughtful capital allocation.

This is epitomized by raising its dividend for 60 consecutive years. Today, Hormel is navigating a dynamic food environment with a balance of market-leading brands, a well-positioned foodservice segment and expansive global presence. Just one administrative note, as Hormel will be reporting fiscal Q1 EPS on February 26, they are in a quiet period and will not be able to offer Q&A either here in the main room or breakout. So no Q&A. Jeff, welcome back. Great to see you. Thank you, and take it away.

Well, thank you so much, Jon. I always admired and appreciated working with you, and it's fun to be introduced by Jon again. I looked up so 10 years ago, we were here, and Jon introduced us that time, too. And he said, for 125 years, Hormel has been the protein company everyone else would like to be. You're going to see that John Ghingo and I are really leaning into this position as this is a key element of the Hormel story. We'll have the usual forward-looking statements and be using some non-GAAP financial measures as well. So what is the Hormel story? Been around for 135 years. George Hormel came to Austin, Minnesota in 1891 to start of the company. We've been listed in the stock exchange since 1927. We are kind of a blend in the sense, okay, we have the cutting-edge discipline of being at conferences and dealing with public shareholders and quarterly earnings calls.

But we also have the Hormel Foundation that votes 46% of the stock, and they have a very long-term community-oriented outlook to the company. And so we've always benefited, frankly, from having both of those, I feel. We have a strong, leverageable balance sheet. We are indeed a dividend aristocrat. In fact, we're in the aged category of dividend aristocrats, having celebrated 60 years of it, as John Feeney mentioned. And what you're really going to hear about this afternoon is our protein packed portfolio and the multichannel presence where we exploit that. So today, we operate with 3 reporting segments: Retail, Foodservice, International. Our retail segments include grocery aisle items such as SPAM luncheon meat and Hormel chili, Planters and SKIPPY. We're in the refrigerated section with traditional products such as Hormel pepperoni or Black Label bacon.

We have better-for-you protein items such as Jennie-O and Applegate. And our retail division also includes an over $800 million partnership in Mexican food with authentic Mexican companies, Grupo Herdez and Grupo KUO. We have long emphasized foodservice for Hormel. We want to be at all meal occasions where consumers are looking for great convenient food items. And our foodservice group really as a pillar in the industry, their trademark is doing better than others in the industry. We've enjoyed 10 consecutive quarters of organic net sales growth from that group. And one of their points of difference is their direct sales force, over 200 strong. They get in with operators and they focus on innovations that save operators labor and provide delicious options for the patrons. Our international go-to-market strategy is kind of a 3-pronged approach.

We have -- our multinational is mostly our China operation. So where we celebrated our 30th anniversary in China. Today, that is a profitable growing business in both retail and foodservice. We also have exports such as SPAM luncheon meat and SKIPPY and Planters that are in over 50 countries throughout the world. And then we go to market in partnerships or sometimes joint ventures, sometimes licensing arrangements with such companies as CheilJedang in South Korea, San Miguel in the Philippines and Garudafood in Indonesia. John and I took these current roles, Interim CEO for me, the 11th President of our company for John Ghingo in July of this past year. So we were well into our third quarter when we came aboard in those roles. And at that point, the company was enjoying solid top line performance.

Indeed, every quarter last year, we ended up having sales growth, which is nice in this environment. And that's because of those trusted brands delivering on consumer and operator needs. But the bottom line really proved to be more challenging in 2025 and got actually harder as the year went on. We were facing significant headwinds in raw materials, many of which were up 20%, 25%, 30%. We also had a couple of operational challenges, a product recall and a fire in one of our plants. So when all was said and done, 2025, we enjoyed top line growth, but we did not deliver the bottom line the way the company needs to. So clearly, heading into 2026, that was the goal. That was the project is get the bottom line moving at a commensurate level with your top line growth. And we didn't want to just hope to do that. We wanted to take actions in late 2025 that would put us into a better position to be able to have that kind of strong earnings growth in 2026.

So we took -- well, we'll talk about 5 of them. First of all, when you head into a new year, you can sharpen your focus on which brands you want to promote, which brands you want to advertise. That earlier slide talked about how our retail group has over 40 brands that are either #1 or #2 in their category, but you can't focus on 40. And John is going to talk to you later this afternoon about our priority brands in the retail area, and we indeed heading into 2026 are pushing those brands. Secondly, we talked about the cost increases we experienced, and we kind of experienced 2 waves of them. The summer had a big spike. And then often in the meat protein area, you'll see it recede back in the fall. And so we kind of waited to see if that would happen. It didn't happen. If anything, it went up even higher in the fall. So ultimately, that required us to take sort of 2 waves of pricing.

In our experience is in the foodservice industry, it takes about 60 days to implement pricing. In the retail side, it's more like 90 days. And so wave 1 is done. Wave 2 is just finishing and early in Q2 here, we'll be in a position where it will all have been taken care of. The company has been talking about its transform and modernize initiative for the past 2 years. And indeed, that's still going to be an important pillar of how we go to market in our company here in 2026. We have dozens of projects that are aimed at saving money, improving our bottom line, but also ultimately transforming and modernizing how we operate. Another thing we worked on and announced late in fiscal 2025 was a cost reduction effort on the sales, general and administrative side.

We had allowed those expenses to grow at a rate that was a lot quicker than we were growing top line and bottom line, and we needed that to stop being a headwind and have a chance of maybe that could be a little bit of a tailwind for us. So we took the hard action of reducing costs in those areas. We were reinvesting some of it back in technology and capabilities in that regard and also some of it back on the personnel side. John will give you a couple of examples of that as well. And then lastly, one of the observations I had coming back to the company, the company had -- so when I was here 10 years ago, we had a grocery division, Jennie-O, Refrigerated Foods. It was more supply chain oriented and you kind of ran -- each group had their own sales force, each group had their own supply chain, their own plants, et cetera. So the company in the ensuing years had centralized for very good reasons, for efficiency reasons.

It's great with customers when you can go to Walmart with one voice and not have 6 different voices. But there to me, coming in, it was like, okay, we've centralized it, but do we have the structure in place to collaborate to get the right people in the right room at the right time to actually respond to challenges such as the cost spike we saw last summer. And I think we're in a lot better position to do that right now. Last night, we put 2 items on the transom, if you will, news items for the company. So one was knowing we were coming to CAGNY today, but we don't announce earnings officially till next week, we want to see, okay, can we at least give you an update. And so we did that indeed last night, announcing our fifth consecutive quarter of organic net sales growth at about the 2% organic sales growth level. On the bottom line, we talked about results on track with expectations.

We actually were $0.02 above what we had expected for the quarter. So we think we have momentum. So far, so good, and we're well positioned to deliver the profitable growth that we know we need to do in 2026. The second announcement related to our Turkey business, but a part of our Turkey business. And I want to be sure to explain that to the group here tonight. So you see the whole bird, Thanksgiving turkey on the slide. So Turkey has come in hens and toms. You grow hens, to the 14 to 2-pound range, and that's the Thanksgiving product. Tom turkeys are for all the other products, lean ground turkey, turkey burgers, breast meat for deli or for food service. You grow the toms to over 40 pounds and you have the efficiencies from that. We are selling the hen part of the business. We are selling the plant affiliated with that.

We're selling the feed mill affiliated with that, the live production assets as well and grower contracts that raise hens. The entire tom part is still part of Hormel. We still own the Jennie-O brand. It will still be a big point of emphasis for us. We do expect minimal impact to 2026 fiscal year results. And that is in large part because under this agreement, so we announced it now, we're going to try to close at the end of Q2. Anything booked by then is part of Hormel and Jennie-O sales for this year, and most of it's been booked and we have a custom manufacturing arrangement with the new buyer that, okay, even if we booked it in April, but we don't ship it till September, that will be in our financial results. So you're going to see a more minimal impact to 2026 results.

The transaction is expected to close at the end of Q2. We will do the best we can to kind of provide you this updated adjusted earnings picture, but the GAAP earnings are going to have to depend on, okay, how does that sort out. And so we're not going to have that for you clean until the end of Q2. Ultimately, the other thing we did last night, and we certainly can do here today is reaffirm our fiscal 2026 outlook. We feel that we can grow organic net sales in the 1% to 4% range and adjusted diluted earnings per share in the 4% to 10% range. At this time, I'm going to turn the program over to John Ghingo, who I've had the great pleasure to work with for the past few months.

John has a great internal reputation at Hormel, great followership from his 4 years at Applegate and is 1.5 years now running our retail business and serving as President. But he also has a much broader background as well. He was with Nabisco and Mondelez, where he ran Oreo on a worldwide basis. He was with the WhiteWave organization, Silk and so similar to Applegate, the new age style of products. And he's been in the private equity space as well. It's been great we're partnering with him, and I think you're going to enjoy hearing what he has to say about our protein-focused outlook.

Thank you, Jeff, and it's been an absolute pleasure working with you in partnership. Good afternoon, everyone. Pleasure to be here today. Jeff and I have had the opportunity over the past 7 months to really get clear on our strategy, our priorities, the capabilities we need to win. And with that clarity, I personally am seeing Hormel Foods in a new light with a lot of confidence for our future. And with that, I'm going to play a brief video to get us started.

[Presentation]

Our path forward begins with the consumer, and it's built upon our unique position and opportunity in the industry. It's also grounded in a set of deliberate actions that are already underway across the business. This is a trend line of Google search activity for the term protein over the past 20 years. If you were to overlay on this over time, other terms, other dietary forces in the food industry, think about keto, paleo, low fat, low carb, low sugar, low calorie, you would see a lot of ups and downs. And you wouldn't see anything that endures with a sustaining trend like what we've seen in protein. And while it may feel like over the past 2 years or so, there's been a bit of a frenzy around protein, even here what we've talked about and heard this week at CAGNY, the reality is the protein growth is a long-term enduring trend.

And what's driving that is truly consumer interest and desire to learn more about protein. And so when you look at the list on the right of the perceived consumer benefits coming from protein, it's quite a long list. It starts with stuff at the top that you might think of, obviously, like strength, energy, but it comes on down through general well-being. For the aging population, protein is increasingly associated with healthy aging and bone health. It's associated with weight management, gut health, immune function and importantly, satiety. And with that type of list of benefits associated with protein, it's not surprising that over 2/3 of consumers are intentionally consuming protein. With that type of penetration, I consider protein to be an expansive movement across the world, geographically, across generations, from a need stating usage occasion standpoint and importantly, across channels.

When you look at it geographically, it's not just the North American dynamic. We have an expected doubling of protein market size by 2033 in Europe, Latin America and Asia Pacific as well. When you look at it from a demographic standpoint, you often think about the younger consumers. And certainly, younger consumers are driving some of the trends around protein recently. But the reality is the protein demand is across all age cohorts, and it's increasing across all age cohorts. That being said, it is extremely impressive that over 50% of Gen Z consumers are wanting to eat more protein. That speaks volumes about the future projections for the protein market and what's ahead. So who is part of the question and the desire for protein is part of the question. But the other part is for it to fit into my lifestyle as a consumer is when, where and how am I able to get the protein I want when I want it. And so this is a simple look at occasions and when protein is in demand.

And what you'll see here is consumers are looking for protein for breakfast, lunch, dinner and all their snacks in between. And a couple of specific dynamics I'll call out around this, which are important for our industry. The first is the nature of snacking. So while there is some pressure in terms of downward pressure on consumption of what I would call more traditional snacking categories, thinking about snacks that are designed for munching or treating, snacks with carbohydrates and sugars, the behavior and need for actually mini meals, fuel, snacks on the go is still there. And the desire for sustaining snacks, what I would call substantial snacks that actually satiate and fill is filling that gap and on the rise. The other dynamic that's changing within here is the morning is fundamentally changing.

Whether you look at a traditional morning breakfast, a convenient morning breakfast or morning a.m. snack, consumers are increasingly looking for protein and energy from their fuel in the morning. So these are some of the fundamental changes we're seeing with consumer behavior. Now as you think about that landscape and say, okay, if consumers want protein at a moment's notice for all these different occasions, that's not happening in the home kitchen exclusively. We're seeing broad demand for protein rising across away-from-home channels. And so as we look at what we call our food service channels or our convenience channels and away-from-home moments of consumption, the protein demand is increasing. And that's putting pressure on the operators of food service establishments and convenience operators to have the right solutions. How do you have the right protein at the right price with the right taste, the right availability and accessibility at a moment's notice.

And so partnering with those operators on those solutions is critical. And as we look forward, the demand for protein is not going to slow down. In fact, if you look at some of the latest news around protein, whether you look at the newly released dietary guidelines that have protein front and center, where you look at the increasing adoption rates of GLP-1s, protein is expected to be at the heart of the nutrition and consumer landscape for years to come. Now with that backdrop of what I'll call overwhelming demand and interest in protein, this is where I find our intersection with Hormel Foods and what we do. We've been in the protein business for a long time. And with the recent frenzy of interest around protein, we're seeing protein added to all kinds of foods and products and categories, even some beverages. And at Hormel, we like to say we do protein the old-fashioned way through the food.

And when we talk about real food, that's what we're talking about, real food protein. So from a consumer point of view, why do they love real food protein? It's joyful, delicious, energizing, comforting, sustaining, exciting and nourishing. That's the love consumers have for real food protein. That being said, real food protein can be hard. How do you have it conveniently available when you want it? How do you make sure it tastes great? It's affordable, it's accessible. That's the world in which we operate.

And so our focus at Hormel continues to be on making protein easy, whether it's a snack on the go, whether it's a multi-compartment tray designed for entertaining occasions or shortcuts in your home kitchen to get dinner or breakfast on the table quicker or importantly, shortcuts in an operator's kitchen that help a food service operator save labor and drive efficiency, we are in the business of helping make protein easy for our consumers and our operator partners. At the same time, the food landscape continues to evolve. Consumers continue to look for more flavor and food experiences in general and certainly connected to their proteins. And so we are also incredibly focused on bringing distinct flavor experiences to the world of protein. Again, whether that's a snacking moment on the go, whether it's something you're preparing in your home kitchen or something we're collaborating with a food service operator that will appear on their menu in an efficient way.

And finally, is the notion of value. In a backdrop where consumers are increasingly stretched and strained both from a budget standpoint and a time standpoint, we need to make sure that our products and our brands are commanding value, that they're worth it, and that can be delivered in the form of affordability, convenience, food experience, versatility in the home kitchen, all of those are ways for us to deliver value. And so we scrutinize the value equation on all of our value-added protein offerings to make sure we're getting that balance right. So from all of that, from our deep experience across a broad range of proteins and our deep understanding across a broad range of moments of consumption, we are in a unique position in the industry. We are the consumer company that is built to win with protein. Now I will make 3 points relative to our unique position.

I'll kind of walk through this. The first piece is a clear sense of enterprise focus. We've reinvigorated our purpose, our mission and our strategic focus, and I'll walk through that in a few minutes. We also have a wonderful portfolio. As Jeff mentioned, we've increasingly focused on the parts of that portfolio with the most opportunity. And finally, we're turning all of this potential into a set of decisive actions that are propelling us down the road to profitable growth. Enterprise clarity starts with purpose and mission, and I start with purpose because purpose is our why. It gives us focus as an organization on what matters most. It's our North Star, and I'll touch on our new purpose in a minute. From our why and our belief in what we're doing also comes our energy. Our energy is what carries us forward on our mission, how we show up to work every day, what we're set out to do, how we're looking to do things differently.

I will touch on our mission as well. Our newly articulated purpose is fueling every day with real food for real life. Our nourishing options provide the fuel people need to get from one pit stop to the next. That is how we view our protein-centric portfolio, truly providing the fuel people need. Now the accessible, affordable, convenient nature of the products we sell make us very applicable for every day, whether you're away from home, at home, whether you're stretched or screened, how can we plug easily into your lifestyle with real nourishing food that help you deal with the demands of real life. That everyday opportunity, the challenges our consumers face, the challenges our operators face in a challenged food service environment continues to evolve. It's a moving target.

And so our focus from a mission standpoint is to continue to get better and better, to continue to create better and better protein-powered solutions that help nourish people while never forgetting about investing back and building up the communities in which we operate. The opportunity for protein is immense, but we need to keep raising the bar, and we need to keep delighting our consumers and partners. So as you look at that plot at a high level and say, okay, how do we activate against that purpose and that mission? I do come back to our portfolio, not from the standpoint of everything that's in it, but from the standpoint of what our portfolio affords us, the portfolio we've built over time is it affords us choice. And so when you look at the breadth of our portfolio and think about it from the standpoint of protein, pork, turkey, beef, chicken, nuts, nut butters, a great breadth.

If you look at our portfolio from the standpoint of occasions for consumers, breakfast, lunch, dinner, snacks in between. When you look at our portfolio from the standpoint of temperature state, frozen, fresh and refrigerated ambient and shelf stable. When you look at our portfolio from the standpoint of pricing tiers, affordability, mainstream and even premium, we have a great breadth of opportunity embedded in our portfolio. We also have a great breadth of opportunity in terms of channels. If you look at our traditional retail channels, we're deeply penetrated across all the major retail channels, whether that be traditional grocery, mass merchandisers, club. We're also developing strongly in e-commerce channels. But our food service away-from-home business gives us access to so many moments of consumption where protein is increasingly relevant.

If you look at schools from K-12 to colleges and universities, we're a partner in those channels, from hotels to hospitals and health care, restaurants, from white tablecloth restaurants to QSRs to mom-and-pop shops down the street, we are within arm's reach of our consumers. So with that clarity of purpose and mission and with that wide breadth of choices in front of us, the critical piece is strategic focus and putting our energy, our time, our resource, our investments where they will make the biggest difference. And so I'm going to transition here into highlighting our strategic focus areas going forward. We have 7 strategic focus areas. I will touch on each one. They are grouped in 3 areas. The first area is about expansion and growth. The second area is about transformation and the third is acceleration, which is really our people, our talent, our capabilities and our culture.

So to start with growth, I start with our brands. We continue to leverage our brands and strengthen our brands. And for our retail portfolio, those brands are consumer-facing. We need to make sure each one of our consumer-facing brands has a clear ambition, a clear role, clear strategies and a big consumer opportunity. As we refresh, renovate and innovate against these brands, we need to make sure we're moving where the consumer needs us to move. Now some of our retail brands stretch over across away-from-home and foodservice channels very well. Some of them stretch to our global markets very well. But we also have a number of very powerful bespoke foodservice brands that mean a lot to our operator partners as they think about the quality and value that our foodservice solutions bring them every day under that branded portfolio.

From a retail perspective, we've recently gone through quite an exhaustive analysis to get to true prioritization. We've looked at our portfolio financially, strategically and importantly, from the consumer point of view. We've landed on what we call our top 8 brands. These are brands where we have strategic advantage, we have some financial advantage, and we also see a very clear opportunity to build a bigger consumer platform for each one of them into the future. We have also identified what we call next sources of growth. Think of these as platforms we're building today that will be incredibly relevant well into the future. They align well with our projection of consumer trends. Think about things like ready-to-heat and eat prepared dinner entrees. Think about things like substantial snacking and evening snacks. Think about things like authentic Mexican food experiences. These are our next sources of growth and our platforms for the future.

Now what does it look like when we activate one of our brands with this increased focus and we turn it into a bigger consumer opportunity. I'll speak to Planters first. So Planters is a leading brand in the snack nut category, a lot of great strengths. But if you actually take a step back and think about the inherent properties of nuts, the fact that they're real food, that they're packed with protein, that they're satiating, they actually are playing in that much bigger space I talked about earlier of substantial snacking. By adjusting Planters with different points of distribution, different channel innovation, packaging formats, flavors, marketing messaging, we are on a path to unlocking a much bigger frame of reference called substantial snacks for Planters and moving beyond the measured packaged nuts category.

A second example of that is our Applegate brand. So Applegate is our high animal welfare, simple ingredient, environmentally conscious brand that plays across the store in a variety of different meat categories. Applegate also happens to align incredibly well with consumers' increasing desire for convenience, especially in the morning. So with more and more consumers, as I mentioned earlier, looking for convenient protein solutions in the morning, we've opened up a major growth platform for Applegate around convenient breakfast. Part of that was done by leveraging our core frozen breakfast sausage platform with channel expansion and marketing growth. But part of it was by introducing a range of new products that are fun, super convenient in the morning products, things such as the Applegate Frittata Bites, which we sampled earlier or the pancake and sausage on a stick product or Applegate breakfast sandwiches.

All of these are examples of how we're becoming an even better ally for busy households looking for great, clean solutions in the morning. Moving past our brands, I'm going to touch on 2 other strategic focus areas for our growth agenda. This one is building what I call enterprise-wide growth platforms. In our new scaled operating model that Jeff mentioned earlier, we have the ability to build bigger platforms that stretch across markets, that stretch across channels. That's how we will leverage our scale for growth. It could be building a global brand. It could be a more global cross-channel innovation platform. One example of this is SPAM. If you were to take the narrow view of SPAM, you would say it's the leading brand in the canned lunch and meat category, and it is. It has a very strong market share in canned lunch and meat. But our team chose to look at SPAM differently.

We took a step back, inspired by the way people use SPAM in Asia, in Hawaii in different sushi formats, SPAM musubi, our team chose to reposition SPAM into this much bigger growing global market called global sushi. And in fact, we now have SPAM and sushi departments of grocery stores from coast to coast in the United States, delighting consumers and working closely with our operator partners to make that a reality. This is truly a global platform that we can take across channels and across markets as we continue to scale SPAM globally. The second example of an enterprise platform is how we approach Mexican. We've been in the Mexican business for a long time through our partnership with Herdez del Fuerte. Now through that partnership, we have access to Mexican insights, Mexican flavors, Mexican recipes, Mexican foods. And so we build our Mexican business from that base.

What we also do is we're now extending our Mexican flavor systems and brands into new categories like refrigerated entrees, where we're offering things like Herdez branded Al Pastor or Herdez-branded Carnitas. We are also leveraging our Mexican know-how, working closely with food service operators in their kitchens to figure out how to make their protein menu authentically Mexican and put great items on the menu they can feel good about. This is another platform we're scaling across the company. Our third growth focus is what we call origination. In a world where the demands for protein to get easier, more delicious, more convenient, more affordable are going to continue to rise, we need to be ahead. Our founder, George Hormel, many years ago said originate, don't imitate and that is our call to action, origination and figuring out what's next.

One example of this I'm going to go to is solving a pain point. A lot of the best innovation comes from finding something that's truly a pain point for a consumer or an operator. In this case, the pain point was breaded chicken. Breaded chicken has been a huge growth space in the foodservice outlets across many channels, partially driven by the growth around the fried chicken sandwich. But preparing from scratch breaded chicken from a raw state is actually very time-consuming and very messy. Now there are frozen options, but those frozen options still take 6 or 7 minutes in the fryer to come out of a frozen state. They tend to lack of distinction. And so we took our Flash 180 platform, our Flash 180 platform means a promise of 180 seconds or less prep time in the kitchen. We took our Flash 180 platform, and we expanded with breaded chicken.

And what we're now delivering to operators are breaded chicken solutions that can go from a thawed state to the plate in 3 minutes or less. A very elegant solution in the kitchen, a lot of efficiency, but also allowing our operators to delight their eaters with crispy, high-quality breaded chicken that they're looking for. The second innovation example I'll touch on is bacon. So bacon is a category we know well. People love bacon, not surprisingly. We hear from consumers that they eat bacon more often because they love it so much. We hear from our operators, they'd love to put it on the menu and more items. But the reality is bacon is hard. People don't like touching raw bacon, cooking bacon, messy cleanup, grease, there's a lot of issues with bacon that make it hard.

So we've been in the business of making bacon easier for some time, whether it's our fully cooked platform that we drive through foodservice to make fully cooked bacon high quality and operators' kitchens. We have tearaway pouches for home kitchens, pre-portion pouches of microwave-ready bacon. That's also a good solution that's driven growth and distinction for us. But our latest innovation in bacon might be our easiest yet. We call it Hormel Black Label oven-ready bacon. It's sold at retail on a disposable tray. You bring it home on that disposable tray as a consumer. When you're ready to cook, you slide that tray into the oven, you never touch the raw bacon. When it's done cooking, you pull it out, you can consume the bacon and throw the tray away. No cleanup, no mess.

This is proving to be very popular with younger consumers who are looking for convenience, and it's proving to be very incremental and additive to the bacon category in total. We have a lot of growth opportunities on this business. I'm now going to move over to the fourth strategic priority for us is just making sure we have our supply chain in a strong enough condition and really focusing on the future of our growth agenda so it can handle what we need to grow our business over time. We have been, over the past 2-plus years, as Jeff mentioned, through our transform and modernize initiative, really working our entire supply chain, investing in it and improving it from end to end, whether it's how we procure and buy our products, how we plan and make decisions, how we make and manufacture or how we move and store our products, we are investing and improving our supply chain from end to end.

In the near term, some of the opportunities have been network optimization. We've announced over the past year a couple of closures of facilities to consolidate manufacturing. We've also announced the opening of a new distribution center. We continue to make modernization investments where we're putting in new manufacturing capabilities such as a meat snacks manufacturing facility we're building in China. And we continue to invest in what I call more foundational centralized processes. Hormel Production System is our proprietary system we've rolled out across all of our global plants to help us harmonize how we manufacture and how we measure our manufacturing productivity. Hand-in-hand with improving and solidifying our supply chain is simplifying our company. Our company has grown over time, and we need to continue to focus on the simplification agenda.

This includes things like simplifying our processes. We now are leveraging as an example of that integrated business planning, or IBP, across all areas of our company with consistency. The second example of how we're simplifying our company is scrutinizing our portfolio and making sure we are really focused on the lower complexity, higher profitability strategic choices for the future. Here, I've highlighted a few of the transactions we've announced recently, a couple of them being smaller businesses that still had a lot of potential, but needed a new ownership structure to extract that potential. And then a couple of businesses are what I would call more commodity-oriented businesses that are not as aligned to our strategy of a consumer-driven value-added protein company.

The most recent example of that is the one we announced yesterday that Jeff touched on, which is the transaction of divesting our whole bird turkey business. In a way, this turkey story is a microcosm of our overall company story, meaning we will continue to focus on Jennie-O. It is one of our top priority brands. It's the #1 brand in retail for ground turkey, which is an incredibly on-trend growing category, meeting consumer demand for versatility and lean ground protein. We will also continue to leverage Jennie-O and Turkey in value-added formats with our advantaged foodservice model. But we are exiting the part of the business that is more commodity-oriented, that is more volatile, that is less connected to consumer demand and trends. Our sixth focus area is modernizing our technology and data.

And what you will continue to see from us is a steady drumbeat of investments and improvements in modernizing our company. whether that's investments we're making in AI to accelerate our growth agenda, whether it's investments we're making in our manufacturing facilities to automate production or whether it's the strengthening of our tech stack overall, working closely with partners like Google Cloud, o9 and Oracle to make sure we have the platforms we need and our foundation technologically speaking, for the future. The final strategic focus area for us is acceleration through talent, capabilities and culture. This is all about our people. And what we're building at Hormel is what I consider to be a best of both model. At Hormel, we have deep institutional knowledge. We have deep culture. We have deep commitment to our company, and we have great knowledge.

Think about from a Hormel perspective, things like deep knowledge of proteins, deep understanding of channels and customers, deep understanding of consumers and culture. But what we're marrying with that is some capabilities we're bringing into the company. And so we are bringing in some external talent, some external leaders. I'll touch on that in a moment. And the idea is to bring in some things that are additive to us. Think about things like data, technology, e-commerce, revenue growth management, innovation. That journey begins with our leadership team at Hormel Foods, and I'm excited to share some of the recent leadership appointments we've made within our leadership team. First, all the way on the left, we have Jeff Baker. Jeff Baker has more than 35 years of experience working across all parts of Hormel, deep institutional knowledge, great track record of results.

He has been appointed to Group Vice President of Enterprise Business Performance working across our business units and our supply chain to ensure strong decision-making, strong execution, really leveraging integrated business planning every day. Natosha Walsh is more than 25 years with Hormel. Natosha is our newly appointed Head of Retail Sales. Natosha also has very deep institutional knowledge, customer relationships, understanding of our brands, our people, our channels and retail. Those are 2 of the internal appointments I'm excited about. From an external perspective, we're bringing a few new team members onboard. Domenic Borrelli is joining us as the new Head of our Retail business unit. Dominic comes with over 25 years of consumer packaged goods experience, including from Kraft Foods, Maple Leaf Foods and most recently, Danone.

Jason Levine is joining us in a newly created position, Chief Marketing Officer for the enterprise. Jason has an outstanding track record, more than 25 years in CPG from Mondelez and more recently with some smaller, more entrepreneurial companies. And most recently, we announced the addition of Will Bonifant to our team. Will is our new Chief Supply Chain Officer. He's coming with 15 years of supply chain experience at Hershey helping transform and automate Hershey's supply chain around the world. This rounds out our full leadership team. I couldn't be more excited about this group.

It has that balance of deep institutional knowledge, understanding of proteins, understanding of our channels and customers, married with some of the best-in-class capabilities we're building in the company today to take us forward. And so with that, we believe we have the pieces in place to really convert our opportunity and to unlock that potential into results. We have the clarity of enterprise purpose, mission, strategic focus. We have clarity on the capabilities we need. We have the leadership team in place that I consider to be a best-in-class leadership team we've built. And it is that confidence that we can state the achievable nature of our long-term growth algorithm for Hormel Foods.

In an industry backdrop where growth is difficult to come by, we believe that 2% to 3% organic net sales growth and 5% to 7% operating income growth is achievable for Hormel Foods. And so in conclusion, I would say we've been in the protein business for a very long time, and we are making some pivots. We're making pivots to make sure the consumer, the customer, the latest in data and technology is front and center with how we approach winning with protein. But hopefully, you agree that the uniqueness of our opportunity, the uniqueness of our company is as clear as it's ever been. Thank you very much for your time.

Please join me in thanking Hormel, everybody. And just once again, there'll be no Q&A.

I am Bill Newlands, Chairman of the Board, and I will be presiding at this meeting. It's a privilege to be here tonight with all of you. First, I want to recognize a few changes to our Board of Directors over the last year. Jim Snee departed the Board in connection with his retirement from the role of President, Chairman and CEO, after 36 years of service to the company. We thank Jim and wish him well in his retirement.

Jeff Ettinger, the Company's former Chief Executive Officer, rejoined the Board of Directors in March of last year prior to his appointment as Interim Chief Executive Officer in July. John Ghingo was named the company's new President in July of last year and joined the Board in connection with his advancement. We are also pleased to have Scott Aakre join the Board in May of last year. Scott will be retiring from his role as Group Vice President and Chief Marketing Officer for Retail at the end of the month.

Members of the company's Board of Directors and leadership team are present at the meeting today. In addition, representatives of Ernst & Young LLP, our independent registered public accounting firm, have joined us as well.

And now, I'd like to introduce Colleen Batcheler, the company's General Counsel and Corporate Secretary, who will act as Secretary of this meeting and will address a few procedural matters. Colleen, over to you.

Thank you, Bill, and good evening to you all. Upon entering the meeting, each of you was presented with an agenda for the meeting and on the reverse side of the agenda is a list of the rules of conduct for the meeting. To conduct an orderly meeting, we do ask that participants abide by these rules. The company has received an affidavit of mailing establishing that notice of this meeting was duly given and all stockholders of record at the close of business on November 28, 2025, are entitled to vote at the meeting.

We have been informed that approximately 90% of the company's shares of common stock entitled to vote at this meeting are represented in person or by proxy. And because holders of a majority of the shares entitled to vote at this meeting are present in person or by proxy, a quorum is present and this meeting has been duly convened for purposes of transacting such business as may properly come before it.

As a reminder, any forward-looking statements that we make tonight are subject to risks and uncertainties, including those described in our most recently filed annual report on Form 10-K. Also, we refer to certain non-GAAP financial measures, including organic net sales and adjusted earnings per share. Reconciliations of all non-GAAP measures to the most directly comparable GAAP measures are available in the Investors section of our website.

I'll now turn the meeting back over to Bill to conduct the formal items of business. Bill?

Thanks, Colleen. The first item of business is the election of the 12 director nominees named in the company's proxy statement. A detailed biography for each director nominee is available in that Proxy Statement. In addition to myself, the director nominees are Scott Aakre, Gary Bhojwani, Jeff Ettinger, John Ghingo, Steve Lacy, Elsa Murano, Chris Policinski, Deb Schoneman, Sally Smith, Steve White, and last but not least, Mike Zechmeister.

The second item of business is the ratification of the appointment of Ernst & Young as the company's independent registered public accounting firm for the fiscal year ending October 25, 2026.

The third item of business is the approval on an advisory basis of the compensation for the company's named executive officers.

The fourth item of business is the approval of the Hormel Foods Corporation 2026 Equity and Incentive Compensation Plan.

The Board of Directors recommends a vote for each of the 12 director nominees and for Items 2, 3 and 4. The polls are now open for voting. If you previously voted by proxy, you do not need to vote tonight unless you wish to change your vote. We have made ballots available at the ballot desk just outside the auditorium. If you wish to vote your shares tonight, please deposit your completed ballot, including the legal proxy if you're a beneficial owner of your shares, at the ballot desk, again just outside of the auditorium.

Also, again, if you have already voted by proxy, there is no need to vote today unless you would like to change your vote. We will now pause for one minute to allow any final ballots to be deposited.

[Voting]

I hope you enjoyed the music. It was better than having the board sing. Now that you have had the opportunity to vote, and since all those desiring to vote by ballot have done so, the polls are now closed.

Tony Carideo of the Carideo Group has been appointed to act as Inspector of the Elections. The ballots and proxies will be held in the possession of the Inspector of Election. The Inspector of Election will count the votes. We have received preliminary voting results from the Inspector of Election and can report that each of the 12 director nominees has been elected. And Items 2, 3 and 4 have been approved. Final voting results will be reported following the meeting in a Form 8-K filing with the Securities and Exchange Commission.

Thank you for attending today's meeting. The formal business of the meeting is now adjourned.

We will now have a 2025 business summary presentation by Jeff Ettinger, our Interim CEO; John Ghingo, President, will then provide a presentation with the company's outlook for 2026 and beyond. After that, we will have a brief question-and-answer period to address questions submitted by stockholders in advance of the meeting.

Before I turn things over to Jeff, on behalf of the Board of Directors, I want to express our sincere gratitude for the continued support from you, our shareholders. We appreciate your belief in this organization and we look forward to a bright future together.

And with that, Jeff, over to you.

Well, it's great to be back here in Knowlton Auditorium. It's been 6 years, I guess, since the last live Annual Meeting, and this doesn't mean it's permanently coming back. That will be a decision that the board and management makes year by year, but it's fun to be here this year and we appreciate you braving the typically cold temperatures in late January to attend the meeting.

One other difference this year in the meeting is you don't have to worry about the mad rush at the end because there's no gift boxes out there. The gift boxes are being given out at the SPAM Museum, as has worked very well for the last several years. And so anytime between Wednesday and Saturday, you're welcome to go there. Be sure you bring your proof of being a shareholder.

So I'm here to talk about the 2025 business and it frankly was a very mixed year. In terms of the sales of the company, we actually had very strong top-line performance amidst an environment in the food industry where not a lot of companies have seen that kind of growth. I think that's in many ways because of the portfolio of brands we have. We have great connections still with consumers, whether it's in the retail grocery environment or through our foodservice operators.

Despite these strong results on the top line, it was a challenging year on the bottom line. And I'm going to go through exactly what that meant and what we're doing to try to overcome that going forward. And that is the final point I want to emphasize is we do see a clear path toward bringing those profit numbers to grow more commensurately with what the sales are growing.

So let's start with sales. Overall, 2% growth for the year. We grew every quarter. We grew in all three segments. So strong accomplishment in those regards. In terms of what items are really resonating in the marketplace, they really run the gamut. I mean, you have SPAM luncheon meat, fantastic products, obviously for so many years for the company. And we're seeing the influence. I mean, originally, SPAM was like, okay, followed the troops across the Pacific and found homes in many places all throughout the world. And the flavor varieties that became popular in those areas are in many ways coming back, and so one of the new flavors this year sold here in the U.S. is Korean barbecue.

In the international market, one of the exciting accomplishments that the team really wanted to tout was the fact that with one of the key customers in Japan, FamilyMart, we have now sold 100 million SPAM musubi. And I think the domestic market, John is going to talk to you about how it's catching on here in the U.S. as well.

We have great franchises in better-for-you meat protein, such as Jennie-O and Applegate and a variety items in both. And then the Foodservice team just does such an outstanding job creating innovative items that consumers like and that, frankly, operators like because in many cases they take labor steps out of the operation and make it safer for them to operate.

So here's the less-good news part. Clearly in most years you're looking to grow. You're looking to grow your top line. You're looking to grow your bottom line. That did not happen in fiscal 2025. Indeed we declined in earnings from $1.58 per share to $1.37 per share. The biggest culprit in that was major inflation in input costs. So, whether it's pork bellies or pork trim or beef costs, I mean, in many cases, as summer hit up 20%, 30%, 40%, and often you'll see a summer spike and then maybe it'll come back down in the fall. It actually got worse in the fall and so both of those were very challenging. You need to at some point be able to take pricing then to get yourself back level to where the market is, but it's usually about a 60-day process in Foodservice to attain that pricing and up to a 90-day process in retail. And so what it ultimately ended up having to be 2 waves of pricing and most of it did not catch up during the fiscal year.

We also had a couple of isolated operational incidents that were unfortunate. We had a fire at the SKIPPY plant in Little Rock, which knocked us out of production for a time. And we had a recall here of the Fire Braised product based here in Austin. So ultimately a 13% decrease.

We had another strong year in the very important safety area. The second best in the company's history. The best had been the year before, 2024. Really, the key here is that training. The 17,000 employees being trained and the mindset of continuous improvement, recognizing that any injury rate is not an acceptable injury rate, we need to keep working on that.

And then in terms of cash return to shareholders, this is something that the company really stands out for. We're one of the few companies in the United States that qualifies as what's called a dividend aristocrat, which means that not only have we paid a dividend for many, many years, we've increased the dividend 60 years in a row. The increase rate has started to decline, so you'll see this year it was just a penny, and that it matches up to the fact, okay, our earnings have not been as strong. And so we need to get the earnings growth back to make sure we can keep having this great pattern of growth for the dividends.

John's going to cover 2026 for you, but I want to talk to you about a couple actions we took late in fiscal year 2025 to hopefully set us up to be in a better position to deliver both top and bottom line growth in 2026. Because we can't just sort of hope or wish that things are going to get better, we need to make sure we're being proactive in that.

So first would be, I said we already had pretty good growth last year in all three channels. But by the way -- as you start a fresh year, you can kind of reload your marketing and advertising budget and you can focus that spending on items that you think are going to help drive the mix you're looking for. That maybe in some cases are a little bit more profitable products for the company, and indeed we're doing that. We're also utilizing new capabilities to be able to enhance the spend.

I mentioned to you how pricing lagged and so that is a benefit heading into this year. So we are catching up. And we're starting to get both in the Retail and Foodservice environment where we're more balanced in terms of what the costs look like and the prices we charge in the marketplace.

We had -- the company's had a transform and modernize initiative for -- this is the third year heading into this fiscal 2026. It's been a very strong program for the company in terms of cost savings but also modernization and efficiencies. Last year some of the benefits from that kind of got swallowed up by those huge increases in raw material, so you didn't see it go to the bottom line. This year, our expectation is these dozens of new projects in 2026 will benefit the bottom line. We're also planning to utilize some of it to enhance that advertising spend and market those items.

Late in fiscal 2025, the company announced that we were going to do a restructuring. We were going to look, aiming at what's called reducing SG&A, so selling general and administrative expenses. Some of your overhead expenses, those had grown significantly over the last couple of years, even though our sales weren't growing at that rate and our earnings were definitely not growing at that rate. And so the goals of this program were yes to reduce spending, to give ourselves a better chance on the bottom line to be able to grow in future years. But we also took the opportunity to really say okay, take a fresh look at the organizational structure we need to have going forward and reorganize for faster decision making.

And then lastly, we're saved back some of those savings and say, okay, we're going to invest some of those in technology, in food safety and quality, and in new capabilities. And then lastly, over the last couple of years, the company has done a number of things that led to more centralization. So they had a One Supply Chain initiative where it's all kind of coordinated operations and shipping and logistics and so forth , all kind of in one entity. A couple of years ago, we changed the reporting segments. We had the old grocery products, refrigerated, et cetera. Now it's Retail and Foodservice. And in doing so there's great reasons for that from an efficiency standpoint. There's excellent reasons for that in terms of leveraging yourself with your customer and being more important to the customer. We heard just in today's meeting that we've become one of the most highest ranked retail customers in terms of what we provide and all types of services.

Ultimately then, you need to however coordinate this kind of group, and if you're going to be centralized, you need to make sure your decision-making, that people are talking, that they're collaborating. And to really facilitate this, we added a new position this year, so Jeff Baker, a long-term senior leader for the company with experience in all aspects of the business, is now our Group VP of Enterprise Performance.

So it is my pleasure at this point to turn the program over to John Ghingo. John comes to the company, we kind of call him, he's kind of an insider outsider. So he has significant outside experience, including with traditional companies such as Mondelez and Kraft. Indeed, John and his team, when he was with that organization was part that managed Oreo on a global basis and grew that franchise from $1 billion to $3 billion. He then embarked into more of the sort of new age or new wave areas of businesses such as WhiteWave that has Silk milk. And then Hormel found him, or he found us, and became the leader of the Applegate team and did that for 4 years out in New Jersey. He then had a stint in private equity with the Whisps brand and then came back to our organization as our Head of Retail here early last year.

It's been a pleasure partnering with John. We started as partners in July. I will continue to partner with him through the end of this fiscal year. And we both are expecting great things going forward. So please join me in welcoming just the 11th President in the company's history, Mr. John Ghingo.

Thank you, Jeff, and thank you all for coming out. Thanks for a little bit of time here. It's a wonderful evening and I'm super proud to be a part of it. I will say, you know, to start off, it is an honor to have the opportunity to help lead this great company forward. It is also a privilege to work alongside Jeff every day. And most importantly I feel very fortunate to get to work among the 19,000 team members we have around the world with Hormel, and I'll talk more about that.

To start off, when I talk about Hormel, you'll hear me say it's a great company. And it is a great company. But I think more important than that is, it is a very unique company. And I guess this is where a little bit of my insider/outsider observations come in. Why do I think Hormel is unique? If you start just by looking at the business, look at our capabilities, our brands, our resources, our assets, we have a great plot in the industry that I think is unmatched with other food companies, by other food companies. That's the first reason I think we're unique.

The second reason I think we're unique has to do with our ability to transform. Over the years, Hormel has continued to evolve, to transform, to grow, to keep pace and stay ahead of the world changing around us. And I think that ability to transform is unique. And the third reason I think Hormel is unique is the people and the culture, and frankly to me, that is the defining characteristic of this company. You'll hear me touch on all 3 of these things in my remarks this evening.

So what is Hormel? I'll start with the what. By the numbers, we're a $12 billion company. We have scale, we have assets, we have capabilities. Our $12 billion business means we have a business that reaches vastly across channels. So if you think about our channels we go everywhere from hotels to hospitals, from white tablecloth restaurants to convenience stores, from grocery stores to club stores, and everything in the middle. We are within arm's reach of consumers when they want food, when they want fuel, when they need nourishment, when they need to feed their families, we are there. That is great channel presence.

With our leading position in over 40 categories at Retail, we also have products across all temperature states, from refrigerated to frozen, to shelf stable ambient products. We also reach consumers for all different needs, dates, and occasions, from breakfast to lunch to dinner, to snacking in between, to mini meals, to entertaining occasions. We have solutions for consumers that plug easily into their lives. And all of this is powered by our 19,000 global team members around the world.

The second question is where is Hormel Foods? Our geographic presence starts right here in our hometown of our corporate headquarters in Austin, Minnesota, and spans across the United States from coast to coast with over 60 locations representing our production locations, our subsidiary companies and our sales offices. And our presence spans beyond that across the world, all the way to the other side of the world with our growing presence across Asia Pacific in that critical opportunity zone for our business.

The third question is who is Hormel Foods? This is about our people and our culture. Our people and our culture, as I said, are a defining trait of this company. It is our people and our culture that take forward and carry forward the things from the past, our focus on quality, trust, honesty, humility. These are the enduring parts of Hormel. It is also our people and culture that allow us to change and adapt and be agile in a world that's changing rapidly around us. It is our people who allow us to do both of those things. And one of the phrases I have used, having worked in other big food companies, is Hormel is different because it is a big company with a soul. And having worked in some other big companies, you don't always feel like there is something deeper. With this company, there is something deeper. There is a soul. And as a big global branded food company with a soul, we recognize that our job is more than just dollars and cents. We have stakeholders to think about.

And so we have a new platform, we call, Good Feeds Us All. And this is really thinking through our impacts as a company beyond the P&L. And really thinking broadly about our impact in the world. We have two pillars, one around planet and one around society. From a planet standpoint we continue to focus on reducing our planetary footprint and reducing waste. From a people standpoint, we continue to focus on our employees, our suppliers, all of our human stakeholders who are out there, and importantly, we continue to focus on our communities. And while we are bigger and we are global and we have a global reach, we don't forget about the importance of local community and what that means to this company and what we mean to those communities. That starts right here in Austin.

We had, just two months ago, our Hometown Turkey Takeover that we hosted here in Austin, I'm gonna roll a quick video so we could take a look at what that event was like.

[Presentation]

So that was our second annual Hometown Turkey Takeover here in Austin. We also extended this year and did a Hometown Turkey Takeover in Willmar as well. And we love the program. It is a great, to me, expression of the care and passion our employees have for the communities in which we work, the communities in which we have our plants around the world.

From these strong roots, this enduring foundation that I talked about of Hormel, we take the company forward amidst a challenging time in our industry, no doubt. We believe our long-term growth algorithm, which calls for 2% to 3% organic net sales growth and 5% to 7% operating income growth is achievable for us in that backdrop. Our consumer-focused protein-centric portfolio, our ability to build our brands, our differentiated brands and innovate in the marketplace are defining traits for us as a company that we can win with competitively. We also know that we are now organized in a way for long-term growth with a very stable financial backdrop and strong corporate citizenship. Put all of that together, and it is a great formula for a company that is poised to grow for years to come.

As we click into 2026, I'm going to touch on a couple of themes or focus areas of how we're changing the trajectory of the company and our earnings trajectory at large. This is about taking what we have, the resources, the capabilities, the brands, the products, the people, and repositioning ourselves in the market, repositioning ourselves for sustained growth into the future. And so how does that start? It starts with a focus on the consumer, and I say that because our business is a consumption-driven, business. Every day, and you all live this. Consumers have choices. What are they going to eat? When are they going to eat it? Why are they going to eat it? And it is a world of choice for our consumers. And our business turns with those choices and winning more of those moments from more consumers every day. And so we focus on the consumer. We call it consumer obsession. Listen to the consumer, understand the consumer, observe the consumer. How can we be better partners to solve more problems, get them past pain points. Sometimes pain points they know about products and categories, sometimes it's things they don't even see and know. How can we help them?

And in a world in which consumers are seeking more and more protein, more and more nourishing solutions, more and more ease and convenience, more and more flavor experience, we have an opportunity to push our brands. To push our categories into very new spaces, we call it beyond boundaries. To big wide open markets, to open up more share of stomach and more business. And at the same time, invest in our business, our technology, our data, our people, our process, so that we not only prepared for today, but we get this company ready for the future.

Our operating model, and Jeff alluded to this, has us sitting with three distinct-scale business units, one Retail, one Foodservice, one International. Each of these segments has its own plot, has its own right to win, has its own growth ambitions, and its own strategy. But they come together with an enterprise strategy and a foundation that sits underneath it, which is a company that is strong, but investments are being made to modernize and transform this company to make it even stronger for the future. That transformation journey is one I'm extremely excited about.

I'll now click through each of our 3 units to share some highlights. I'll start with Retail. Now, Retail is our largest business unit by size and in terms of revenue. It is also the home base of many of our beloved brands. And we have an increased, I'll call it, strategic clarity on how we're going to focus building our Retail business into the future. We have identified 8 priority brands, each of them with a strong competitive position in the marketplace, with strong differentiation versus competitive products and brands, and importantly, with a big consumer opportunity ahead.

Underneath that, we have what we call next sources of growth. So these are big platform areas where consumer trends are heading that we can organize ourselves to unlock big growth into the future. Think about things like ready-to-eat convenient dinners more and more important to consumers. Think about snacking in the afternoon when people are hungry and they need substance and fuel. That afternoon sustenance, big important space. Think about flavor experience and our authentic Mexican portfolio. These are big platforms for today and into the future. And as we take all of this, this framework was developed with financial analysis, with strategic analysis, but importantly, it was designed with consumer at the heart of it. This came out of what we call consumer demand landscaping work where you see why do consumers buy what they buy and eat what they eat all day long. And how do we take some of our businesses and position them into big spaces? By unlocking the resources, the creativity, the investments, the passion of our people, we can do so much with this portfolio that is yet still ahead. I'll give an example.

Let's talk about SPAM for a minute. So Jeff mentioned SPAM as well. You could view SPAM as a leader in the very narrowly defined canned luncheon meat category, and it is that. But our team chose to view SPAM as a global leader in food culture. Well, when you change the frame and look at it that way, all of a sudden you start to think much bigger. And we started to do partnerships with global properties like Disney's Lilo & Stitch or the enduring Dr. Seuss property, Green Eggs and Ham. We executed those programs with collectible cans, in-store programming, working with our customers, consumer activation. Very exciting, very relevant, very culturally on.

And we took the ideas inspired by global food culture of how people use SPAM in Asia and Hawaii, and we brought them to a leading retailer in the United States and said, we'd like to do a trial in the sushi department of your grocery stores on the West Coast and introduce some SPAM sushi formats. Well not only did they work on the West Coast, they worked so well that we've now expanded SPAM in sushi departments across the entire country from coast-to-coast. And we even have some SPAM musubi here, I believe, in the Hy-Vee in Austin. So what we're talking about is taking this narrowly defined canned luncheon meat and opening SPAM up to the global sushi market, which is a much, much bigger marketplace to participate in.

As we think about innovating on our brands, I mentioned getting close to the consumer. We need to be sitting next to our consumer, sometimes literally. As a part of our team, we have what we call a cultural anthropologist. She helps us sit in the kitchens, in the cars, in the workplaces of our consumers. We go on shopping trips with them and we understand why and how they do what they do through observation and discussion. This unlocks new insights.

One of those insights, maybe not the most revolutionary, is that people love bacon. Did you know people love bacon? And people love bacon so much they would use it a lot more often actually, but it's difficult. It's a difficult product. People don't like handling raw bacon. It's messy, there's a lot of clean up. And so the insight was if we could figure out ways to make bacon easier, we could easily get people to consume more bacon and be very happy, right? That was it.

Well for years Hormel has been at this convenient bacon. Think about fully cooked bacon where we leverage with our Foodservice partners in their kitchens, commercial kitchens, or fully cooked bacon in retail where people use it at home. We also have at retail what we call microwave ready bacon, where you tear off a pouch, pre-portioned, drop it in the microwave, ready to go. Easy. But our latest bacon innovation, what we call Oven Ready bacon. To me, it takes it up a notch. This is our easiest bacon yet.

You buy it on the tray at retail, bring it home, take the wrapper off, you never have to touch the bacon. You slide it into the oven, bacon cooks, pull it back out, consume the bacon, throw the tray away, disposable. That solves multiple pain points for consumers and makes bacon so much easier. And we're getting very good reviews on this product, very good repeat rates. And we're expanding distribution.

We also have introduced on bacon some exciting flavors. So think about Cinnamon Toast Crunch Black Label Bacon, which we introduced last year. It's a mouthful, but it was a lot of fun. We got a lot of buzz out of that product. We also more recently introduced a Frank's RedHot Flavored Bacon. These are just great ways to make bacon relevant, to make it fun and to give people reasons to consume.

I'm now going to shift gears and talk a little bit about our Foodservice unit. So Foodservice is a performer for us. This business delivers consistent growth, profitable growth. And it delivers that growth in very incremental markets and channels for us as a company.

Our focus in Foodservice is customers. It's about solving problems for our operator partners to make their lives easier and to make their businesses run smoother. We have scaled leading platforms in both bacon and pizza toppings. And we have an incredibly important growing business in what we call premium prepared proteins. Think about this as high quality meats that enable our operator partners to take complexity and time and labor out of their kitchens with great quality.

Our model is premised on continuing to invest in innovation and capabilities that help our customers stay ahead, that keep us ahead of the competition, and make our customers' lives easier.

Now the secret sauce of this Foodservice team, in my view, like many other parts of Hormel, is also the people. And we continue to invest in our direct selling organization for our Foodservice unit. We call them salespeople, but they're actually a lot more than that. These salespeople are our market researchers. They are relationship builders. They are foodies. They're problem solvers. And they are at the center of so much of what we do with our Foodservice business. I'm going to roll a quick video, which shows you what a day in the life looks like.

[Presentation]

As always, it is the team members at Hormel who will carry our business forward and into the future.

And finally, our exciting International unit. Our International unit has us poised for additional investment and additional growth. In a world where people are looking for more protein in all corners of the world and more nourishing solutions, more convenience, more food safe protein options, we are in a great position to pioneer solutions like we've done in North America, all around the world. We have 3 basic go-to-market models for international business. The first is what we call multinational businesses where we have in-country operations, where we drive performance with our own resources and people. We then have partnerships in different parts of the world. This is what I call the best-of-both approach, where we work with a strong local partner who maybe has some scale advantages locally, some know-how locally, and we bring our global know-how to that to build a successful business together in a market. And then we have exports. And this is where we take some of our loved products and brand, and send them around the world where they are enjoyed by consumers. All three of those contribute to our profitable growth in our International business. All three are important.

Now the multinational approach, I'm going to talk about one specifically, which is our China business. We've built this business over a long time. We've built it the right way. And in fact now we're sitting with a strong business, with a strong team, with a strong culture. They innovate rapidly. We have R&D, we have manufacturing, we have great, great team and culture. And we've been at it for quite some time. I'm gonna show a quick video because we very proudly celebrated this past year, our 30th anniversary of operations in China.

[Presentation]

So for those of you who don't speak Mandarin, what they said there was leading in quality for over 30 years”. And how awesome is it to have a group of people on the other side of the world from Hormel talking and proudly about quality.

The last thing I'll say on International is that it is a two-way street in terms of culturally inspired food. We take our global brands and product platforms and we adapt them locally to make sure they resonate in local markets, whether it's format changes, flavor changes, things we do distinctly to make them work locally. But, and Jeff alluded to some of this, equally important is we're getting ideas back from other markets that we're able to bring to the United States. SPAM is one of those sources. We're doing the same thing on SKIPPY now and bringing ideas back to the United States. So this virtuous cycle of global expansion will help our business here in the United States as well.

And finally, our transform and modernize. I mentioned this, our foundation. We continue to invest across our supply chain. We organize our supply chain into four pillars. We call it plan, how we plan our business, buy, how we procure the things we need to run our business, how we make or manufacture our products, and how we move them around through trucks, other means and warehousing. Each of those pillars is being invested and reinvented for a stronger foundation. We also continue to look at our portfolio, and how do we simplify our portfolio and make sure we're focused on the items that matter most and are the most profitable, and where can we take items out to simplify and take businesses out if needed? And underneath that, we're making critical investments in data, technology, people and processes to create an even better version of Hormel Foods, a more competitive version of Hormel Foods into the future.

So in summary, you know, I'll talk about a couple of things. Number one, I made the decision to rejoin the company 18 months ago because I was excited about these three aspects. I was excited about our portfolio and our nourishing foods and all the proteins we could do in a world looking for more nourishment and more protein. I think we have an immense business opportunity. Two, I was excited about the transformation that we've been on a long journey with and more recently, investing quite a bit in. I think it's exactly what we need to reposition ourselves into the future. And three, and most importantly, the reason I came back and the reason I am so excited about the future is our people, our culture and our community. This is truly a unique company, sitting in a unique hometown of Austin, Minnesota.

And I can remember my first trip to Hormel was just about 8 years ago, somewhere in January of 2018. And I remember coming out and I remember meeting the people at Hormel Foods and I thought, wow, these people are very refreshing. They're very honest, they're very humble, they're very down-to-earth, they're very approachable. I just felt very connected to the people and the culture of the company. And then I also observed just this inextricable link between the company and the community. And I thought this also seems very interesting.

So over the years, as I continue to come back to Austin, visiting and now being here pretty much all the time, I'm observing that, that link is not just a link, there's actually a cultural transfusion of some sort that happens where Hormel Foods is super important to Austin. But Austin is super important to Hormel Foods. The values, the culture of the company live and breathe in the community. And the community lives and breathes in the hallways of the company. And I truly think that is what sets us apart. So I'm very excited to join the company. I'm very excited to join the community. I will also say I'm incredibly proud for all of the team over the years who built what Hormel is today. But as proud as I am about what it is, I'm even more excited about what the future holds. I truly believe the best days of this company are still ahead of us. Thank you very much.

Thank you, Jeff and John, for those terrific remarks. We're now going to turn to the question-and-answer portion of our meeting. As a reminder, questions were required to be submitted in advance of tonight's meetings and we will not be taking questions from the floor. But if you do have a question and did not submit it, please do not hesitate to share it with us through our Investor Relations team who can be reached via email at [email protected].

So with that, I'll ask Jeff and John to come back up to the podium.

So I'll start with the first question. We have a question this evening from [ Mr. Rod Hinker ], who took the time last week to drive over to our corporate office. Mr. Hinker's question relates to a major current topic, immigration and the company's role in it.

The company has advocated for comprehensive immigration reform for years, including leading a trip to Washington D.C. in 2007 with other community members to meet with legislators. We have been early and regular participants in the E-Verify program to verify the identity of each applicant. Once someone joins our team, we treat all of our employees with dignity and respect. If a law enforcement officer comes to one of our facilities with a lawful basis to seek a certain person, we have a duty to cooperate. This is true whether we are interacting with local police officers or federal officials.

This past weekend we joined dozens of members of the Minnesota business community in publishing an open letter to federal, state and local officials, encouraging cooperation to achieve a de-escalation of recent tensions. We did this to support a constructive path forward toward a safe, stable Minnesota for our team members and our communities.

John, do you have this next question?

I do. So our next question came in from Keith Loger. Keith's comment was, "while I believe the overall stability of Hormel is not in doubt, the share price has tumbled terribly the past 4 to 5 years. To what do you attribute this action?"

Obviously, a good question on a lot of people's minds. I would point to a few things. The first thing I would talk about is something I mentioned, but this industry has been under a tremendous amount of pressure, food sector, food industry, consumer packaged goods. If you go back to COVID for a variety of reasons, including inflation, including consumer pressure, the industry has been under pressure and a lot of our peer companies have struggled as well.

But then beyond that, we certainly have had performance issues, and some of the performance issues we have had are things that were self-inflicted that we could have done better. Some of them are things that happened to us that were driven more externally. But when you add all of that up, our performance just hasn't been where we expected it to be, where we needed it to be, where we wanted it to be. And so our performance hasn't lived up, and that's really what's underneath the share decline.

I will take the next question also. So the next question comes from Kenneth Kroupa. "Several years ago I asked if any profits from the China business came back to shareholders and was told at the time that the money was invested back in that country. Is that still the case, and if so, why?"

So I guess I would just pause to say you heard me talk earlier about the China business. We are very bullish on the China business. Not only do we have a strong team, strong culture, strong business in China, it is obviously one of the most important markets in the world. And so we do continue to invest in that market. We invest in growth. We invest in adding capabilities, adding scale, adding people. So we are growing in China, investing in China. That being said, we have recently brought cash back from China as well to directly answer the question.

And then the -- actually the next question is one that Jeff and I have heard quite frequently or repeatedly over the past few months we've been working together. And the question is a simple one. "What are you most excited about as we look ahead?"

And for me, it's interesting. I talked about consumer obsession. I talked about the opportunity we have. I didn't talk much about consumer trends. And when I just think about where the consumer is going, it's even more exciting than where they are today. So for example, the trend around protein, there's a frenzy with protein right now. You're seeing it added, to all kinds of foods and drinks, but the enduring trend around protein is a 25-year trend of people getting more understanding of protein, associating it with energy, strength, satiety, feeling good. And so that protein curve is going to continue to grow into the future. That is an enduring consumer trend that we project out into the future. Also the need for convenient solutions for protein, how to make it easier, that's an enduring consumer trend. And the desire for great flavor and taste, that's an enduring consumer trend. So when I look at those macro trends and then I step back and look at our plot in the industry, it's even more exciting to think about the future and how well we line up with where consumers are going. So that's what I'm most excited about.

It's been exciting for me frankly to come back and be with some of the team. That's always one of the joys frankly, professionally, is to work toward a common goal with dedicated folks who are also trying to achieve something. And it's been fun to reconnect with folks who may all look a little different maybe after a few years. But -- and then lots of new folks. Lots of new folks that came to Hormel directly from college or directly from somewhere else, and then folks who have come into our company laterally. And I've really grown to appreciate some of the other industry knowledge that people bring from other companies that have now -- are benefiting our team.

And indeed, as John and I look to the future, I mean, I think we both feel that that's going to be a key element of going forward for the Hormel company is that balance of, yes, we're still going to be a promote from within, kind of your own draft picks type of organization, but we're going to supplement that with some key free agents to make sure that our team is robust and can continue to grow this company.

Yeah, well said. And I guess I would just say in closing, thank you for the time, for the attention, and for the warm welcome you've afforded me to the company and to Austin, Minnesota, and thank you for coming out tonight.

Thanks very much.

Good morning, ladies and gentlemen, and welcome to the Hormel Corporation's fourth quarter earnings call. [Operator Instructions] This call is being recorded in Thursday, December 4, 2025.

I'd now like to turn the conference over to Jess Blomberg. Please go ahead.

Good morning. Welcome to the Hormel Foods conference call for the fourth quarter of fiscal 2025. We released results this morning before the market opened. If you did not receive a copy of the release, you can find it on our website, hormelfoods.com under the Investors section, along with supplemental slide materials.

On our call today is Jeff Ettinger, Interim Chief Executive Officer; John Ghingo, President; and Paul Kuehneman, Interim Chief Financial Officer and Controller. Jeff, John and Paul will begin by reviewing the company's fiscal 2025 performance before transitioning into commentary on our outlook for 2026. We will conclude with the Q&A portion of the call. [Operator Instructions] At the conclusion of this morning's call, a webcast replay will be posted to the Investors section of our website and archived for 1 year.

Before we start this morning, I'd like to reference our safe harbor statements. Some of the comments we make today will be forward-looking, and actual results may differ materially from those expressed in, or implied by, the statements we will be making. Please refer to our most recent annual report on Form 10-K and quarterly reports on Form 10-Q, which can be accessed on our Investor website under the Investors section.

Additionally, please note, we will be discussing certain non-GAAP financial measures this morning. Management believes that doing so provides investors with a better understanding of the company's underlying operating performance. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Further information about our non-GAAP financial measures including our comparability items and reconciliations are detailed in our press release, which can be accessed on our website.

I will now turn the call over to Jeff Ettinger.

Thank you, Jess, and good morning, everyone. Today, we'll briefly review our fiscal 2025 results, then shift our focus to the strategic priorities and outlook for fiscal 2026. I'll begin with a few reflections on the year and our path forward. Paul will provide additional detail on key drivers from 2025, and then John will share our vision for 2026, and the actions we're taking to deliver consistent growth. I'll conclude [ with ] our fiscal 2026 outlook before we move on to Q&A.

Fiscal 2025 was a challenging year. Candidly, we fell significantly short of our earnings goal in navigating a dynamic consumer environment, elevated input costs and some unexpected setbacks, our bottom line performance was disappointing. On the other hand, net sales exceeded $12 billion, representing 2% organic growth over the prior year, and supported by gains across all 3 segments. We delivered 4 consecutive quarters of year-over-year organic net sales growth. This demonstrates the strength of our [ Protein Forward ] portfolio.

In the retail segment, our leading brands continue to hold #1 or #2 share positions in over 40 categories. Brands such as Jennie-O, Applegate, [indiscernible] and SPAM contributed strong growth for the year. Importantly, the Planters brand grew net sales year-over-year despite first half pressures arising from last year's production disruption. Collectively, these brands represent a wide range of consumer preferences, diverse value propositions and eating occasions. Profitability was pressured across the retail segment, and this decline is reflected in our segment margins. Input cost pressures driven primarily by heightened commodity costs had a challenging impact across our broad retail portfolio in 2025.

The Foodservice segment continued to outperform the broader industry by leveraging our direct sales team, operator-driven innovation and diverse channel presence. Our top line strength was wide ranging across many brands and categories, including the Jennie-O Turkey portfolio, Fire Braised meats, Café H globally inspired proteins, branded pepperoni and branded bacon. These products all showcased the premium protein-centric offerings that operators desire. The broader industry, however, experienced traffic declines and did not grow as expected. This, coupled with higher input costs, tempered the Foodservice segment's 2025 results.

The International segment's results highlight the importance of having a balanced portfolio as some geographies outperformed while others lagged. Our China business was the biggest contributor to the International segment's top line performance in fiscal 2025 and has achieved strong bottom line performance as well. Our branded export business saw a strong top line performance though commodity input costs and trade disruptions weighed on profits. The Brazil market was challenged for us this year and negatively impacted the International segment's ability to deliver on our growth objectives.

At the total company level, our Transform and Modernize initiative played a critical role in offsetting a portion of the margin pressures we faced in 2025. We advanced many strategic pathways under the program, including expanding our distribution network, closing a reallocating product from multiple facilities and advancing our data and process maturity. Much of the work we completed is laying the foundation for growth in future years.

Late in fiscal 2025, we completed an extensive review of all administrative expenses. We made the decision to reduce some of our corporate positions and layers within the organization. This effort resulted in the reduction of approximately 250 corporate and sales positions, representing around 9% of this group. We also address the ongoing cost of benefits by making changes to certain programs. While these decisions are never easy, we believe these actions were both needed and responsible. We will also take the opportunity to allocate some savings from this work to reinvest in other areas, such as new capabilities and enhanced support of our growing brands.

We believe we are coming out of fiscal 2025 with a conviction to win and in a position to grow. Paul Kuehneman will now provide a deeper look at our full year and fourth quarter financial performance. But first, I'd like to introduce Paul to our investor community and congratulate him on his new position.

Paul stepped into the role of Interim Chief Financial Officer on October 27, and he brings more than 30 years of experience at Hormel Foods, including his ongoing role as Corporate Controller. He is a deeply respected leader with a strong command of our business. I am confident you'll find Paul's insights valuable, and I look forward to you engaging with him more closely.

With that, I'll turn the call over to Paul.

Thank you, Jeff, and good morning, everyone. I'm looking forward to connecting with many of you over the coming months. Let's take a closer look at our results.

As Jeff mentioned, net sales exceeded $12 billion for the full year of fiscal 2025. Top line strength continued in the fourth quarter as total company organic net sales grew 2% compared to the prior year. Profit was challenged this year and value-added growth was more than offset by year-over-year margin pressures related to higher commodity input costs, supply chain impacts of [ avian illnesses ] and some discrete items each of which I'll dive deeper into.

As previously shared, persistent inflation in key commodity inputs exceeded our expectations and remained elevated compared to prior year levels. Specifically, we experienced over 500 basis points of raw material cost inflation during the fourth quarter alone. For the fiscal year, [ pork belly ] has increased approximately 25%, the [ pork cutout ] rose about 10%, and [ pork trim ] increased approximately 20%. Beef remained a significant inflationary pressure across the industry throughout the year.

With respect to [ Turkey ], as you'll recall, early in fiscal 2025, we were impacted by avian illnesses across our turkey supply chain and the broader industry. Decrease in turkey supply in the industry have the compounding impact of higher commodity prices. In the fourth quarter, we saw the return of [ HPAI ] cases, especially across the Midwest. Collectively, these developments caused challenges during fiscal 2025, and we anticipate continued turkey supply constraints through the first half of 2026.

As we previously discussed, we took pricing actions at various times during fiscal 2025. However, due to the timing of some cost inflation, we cannot fully offset the margin impacts within the fiscal year. In addition, two unfortunate events took place during the fourth quarter. A chicken product recall, and a fire at our [ Little Rock ] facility. Taken together, these events represented approximately $0.03 of negative EPS impacts in fiscal 2025.

The benefits from our Transform and Modernize initiative helped to offset some of these margin pressures in fiscal 2025. We ended the year having delivered benefits within our stated range and are proud of the capabilities this growth initiative has generated for our company. As we move to SG&A, marketing and advertising spend was lower compared to last year. This was a decision to prioritize efficiency in a challenging cost environment. Importantly, although we reduced spending, we remain focused on leveraging more targeted programs to support our brands. Other adjusted SG&A expenses increased during the year, driven in part by higher employee and external expenses.

As we previewed in our fourth quarter business update, we recorded noncash impairment charges in both our international and retail segments as part of our year-end financial closing process. The international impairment totaled $164 million and was related to a minority investment in Indonesia, an investment that remains both valuable and strategically important to us. Our retail segment impairments were $71 million, primarily related to our [indiscernible] business. We remain confident that our investment thesis is intact, and we are still excited about the [ snack nuts ] category and the protein diversification within our portfolio.

Operating income for fiscal 2025 was $719 million, and adjusted operating income was just over $1 billion. Operating margin was 5.9% and adjusted operating margin was 8.4%. The effective tax rate for fiscal 2025 was 28%, which was impacted by our fourth quarter minority investment impairment. For the full year, diluted EPS was $0.87, and adjusted diluted EPS was $1.37. For the fourth quarter, we recognized a diluted loss per share of $0.10. Adjusted diluted EPS was $0.32. We recognize these results are well below our initial expectations for the year, but as Jeff mentioned, we have laid a solid foundation for a return to growth in fiscal 2026.

I'd like to touch on a few other financial priorities for the fiscal year. We closed the year in a strong financial position with ample liquidity and a conservative level of debt. Cash flow from operations was $845 million in fiscal 2025, and inventories at fiscal year-end were $1.7 billion, an increase of $171 million from the beginning of the year. Capital expenditures were $311 million in fiscal 2025. We invested in high-priority businesses with capacity expansions for Hormel Fire Braised and Applegate products. Our investments also advance data and technology, people safety and animal welfare. Finally, we invested capital in our [indiscernible] China facility to support growth.

In fiscal 2025, we returned a record $633 million to our shareholders in the form of dividends, including our 389th consecutive quarterly dividend. We recently announced an increase to our quarterly dividend of 1%, raising the implied annualized rate to $1.17 per share for fiscal 2026, making Hormel Foods one of the distinguished dividend aristocrat with 60 consecutive years of dividend increases.

Finally, this year marked our second safest year on record following a historic achievement in 2024. I'm incredibly proud of our team members for their commitment to people safety, keeping it front and center every day and making it a core part of how we operate.

And with that more detailed context on our results, I'll turn the call over to John to walk through our strategic focus areas for fiscal 2026.

Thank you, Paul. In fiscal 2025, our protein-centric portfolio demonstrated strength with consumers. We leave the year ready to build off our top line momentum by leaning into our portfolio of winning brands and products. Protein demand isn't a passing trend. It's a sustained growing priority for so many different consumer groups. Hormel Foods is excited to lead the way, delivering real protein solutions for everyday occasions.

As we turn the page to 2026, we have every reason to be confident. We are focused on winning in attractive consumption spaces by positioning our brands and innovation where they have the most significant opportunities, and prioritizing our resources to fuel growth.

Hormel holds a truly unique position in the food industry, an advantage we've built over many years. We have a balanced protein-centric portfolio with broad capabilities to create value and win with proteins. This, coupled with our extensive reach across retail and foodservice channels provides a strategic advantage that we believe is compelling and unmatched in today's industry.

We've evolved from a meat company into a consumer-focused company. But unlike other consumer food companies, we are the consumer company that wins with protein. We deliver winning protein solutions for breakfast, lunch, dinner and every snack in between, at home, or away from home, animal-based, or plant-based, whether you're cooking or someone's cooking for you. Hormel is ready to provide great tasting solutions aligned with some of the most enduring consumer trends in the food industry. Ease and convenience, flavor experiences and the growing desire for more protein.

Today, I'll share 3 focus areas that will guide us in 2026. The first focus is consumer obsession. We already have a strong foundational understanding of our consumers and operators. But in 2026, we are taking that a step further. We are actively listening, learning and anticipating, to better understand the challenges and aspirations of our consumers and operators. All so we can better design solutions and experiences that uniquely meet and even exceed their needs for food occasions. We have great examples of how we have already put this framework into action.

Take our Bacon platform as an example. We've spent many hours in the kitchens of our consumers and operators understanding their pain points. We uncovered a clear insight. People love bacon and want to consume it more often, but they want it to be as effortless as possible to prepare. This insight led us to innovations that make bacon easy in any kitchen. In [ operators' ] kitchens, we brought them our high-quality quick-prep Bacon 1 platform. And now we are introducing the next generation of easy for our operator partners with precooked and preportioned sandwich ready bacon.

In the Home Kitchen, we've climbed to the #1 position in the convenient bacon category through our pre-portioned ready-to-heat microwave-ready platform, and we are now building distribution on the next iteration of making bacon easy at home with our oven-ready bacon platform, an innovation that all but eliminates the cleanup with a disposable oven trade. Grounded and real consumer insights were making sure bacon is accessible and easy for all.

Through deep engagement with consumers, we've uncovered another key challenge. Finding better for you, convenient and versatile meal options is harder than it should be. We've listened closely to those who struggle with this tension. And as leaders in protein, we have been able to provide a range of easy meal solutions made possible by our leading portfolio in ground turkey. Our Jennie-O marketing program presents and offers varied meal solutions that are rooted in meeting consumers' meal time needs for lean, satisfying protein options that are easy to plug into daily life. And we see plenty of opportunities to do even more to aid consumers during yield times with our leading Jennie-O brand and relevant Turkey products in the future.

These successes show how our consumer obsession can drive real marketplace leadership, and this is only the beginning. Throughout the year you can expect to see these insights come to life in bold, tangible ways as we continue to execute and accelerate growth by looking at the world through the eyes of our consumers and operators.

Building on these consumer insights, our second focus is taking our brands beyond [indiscernible] by breaking out of their traditional categories and unlocking new growth. We are stretching our brands to their full potential, by leveraging their protein advantage and unlocking big wide open marketplace opportunities. Protein can play an even broader role throughout the day, across different occasions and channels, and we are stepping into these growth opportunities with our protein-centric portfolio.

Take our SPAM brand as an example, our team saw an opportunity to take SPAM into new formats beyond the can. Inspired by global food culture, we reimagine new occasions for the brand, introducing a sushi style format, now featured in sushi departments nationwide. This innovation taps into new consumers sourcing from the large and growing sushi category. SPAM's success in this product format isn't just a domestic success. By the end of fiscal 2025, over 100 million SPAM musubis have been sold in Japan alone, an incredible milestone made just 3 years after the launch.

Chicken is another attractive growth space with increasing consumer opportunity. And as a protein-centric consumer company, we are thinking bigger. Our innovative mindset and strong extendable brands allow us to follow consumer demand and deliver the experiences they crave. For Applegate, that means leveraging chicken to penetrate on-trend categories like quick prep, breakfast and easy dinner, with better-for-you options such as frozen chicken breakfast sausage and lightly breaded chicken tenders for later in the day.

In foodservice, we're building on the success of our Flash 180 platform. Beyond the chicken breast, we're tapping into the growing demand for chicken tenders and chicken sandwiches by providing operators with a customizable solution that simplifies their back-of-the-house operations. These moves show how we're not just following trends, we're fueling them, expanding our reach and unlocking new growth opportunities.

The third focus is becoming future-ready, rooted in some basic principles, so we can focus on our company premise nourishing protein solutions. We are simplifying our company, and we are renovating ourselves. Portfolio reshaping is a priority. We are focused on strategic categories and brands with long-term growth potential and have made deliberate decisions to simplify. We recently announced plans to move the [ Justin's ] business into a strategic partnership to enable its best path forward. We also recently exited certain private label product lines, and we announced the closure of a nonstrategic soup stock operation to simplify our supply chain.

For internal renovation, we are committed to advancing our data, technology, people and processes. One exciting example is how we are utilizing AI to accelerate and improve our marketing. For SKIPPY, our team leveraged generative AI to create over 25 high-quality seasonally relevant pieces of content in a single day, a game changer for creating impactful content at scale. These assets are now powering engagement through the critical holiday season. This is only the beginning of how we're leveraging AI to boost efficiency and unlock creativity across our brands.

Beyond marketing and innovation, we're implementing AI-enabled tools like [ 09 ] and streamlined processes such as integrated business planning, transforming how we plan and make decisions every day. Enhanced data access, cutting-edge technology and modernized workflows are reinventing nearly every aspect of our business. Across all aspects of our supply chain, cross-functional collaboration, and all the way to the physical and digital shelf. This includes new tools leveraging data and analytics for areas such as pricing, revenue growth management, real-time portfolio management, and assortment optimization decisions.

The focus areas I described are underway now, though we understand our efforts must translate to margin expansion and sustainable profitable growth. We believe this strategic path sets us apart in the marketplace by better meeting the needs of our consumers and operators with our unique and potent protein-centric portfolio, we have the opportunity to deliver consistent profitable growth.

With that, I will turn the call back over to Jeff to click into our 2026 outlook and assumptions.

We said on our third quarter call that our goal is to return to the algorithm of 2% to 3% organic net sales growth, and 5% to 7% operating income growth. These goals are intentionally ambitious, but are grounded in the strength of our portfolio and take the broader food industry environment into consideration.

We are providing fiscal 2026 guidance with a slightly wider range than our growth algorithm. This approach accounts for the dynamic current environment and supports our flexibility to navigate near-term volatility, while remaining firmly focused on the strategic priorities John just outlined. Let's turn now to our guidance and the key assumptions behind it.

In fiscal 2026, we expect organic net sales growth of 1% to 4%. As John discussed, we think our protein-centric portfolio, coupled with our demonstrated strength and presence in both retail and foodservice, puts us in an advantaged strategic position going forward. We already saw momentum on the top line in fiscal 2025, and plan to build on this momentum in fiscal '26 through enhanced marketing support. In fact, a number of these campaigns are already underway as the holidays are key season for many of our strategic brands.

Our guidance also accounts for pricing actions across our portfolio. The steep increases in input costs in the summer and fall of '25 precipitated two waves of pricing actions on many products, and the realization of the second wave will allow us to restore more balance with these inflated costs. In fiscal 2026, we expect adjusted operating income growth of 4% to 10%, and adjusted earnings per share to be in the range of $1.43 to $1.51 per share.

Regarding key input cost assumptions in our outlook, we expect pork input cost to decline compared to fiscal 2025, but still remain above the 5-year average. Beef costs remain high and are expected to be a headwind throughout fiscal '26. And [ nut ] costs are anticipated to be elevated from the prior year as well. We also expect to see stronger turkey markets in fiscal '26.

Gross margin expansion is expected to be driven by a variety of levers, including mix improvements, the wraparound pricing benefits that I just mentioned, and productivity from our Transform and Modernize initiative. I want to be clear about our intentions with regard to the Transform and Modernize initiative. Our efforts will continue in fiscal 2026. However, we do not plan to report T&M savings separately going forward. We believe its financial benefits will be spread in supporting our enhanced marketing programs, offsetting some of the continued inflationary pressure and allowing us to expand margins, and this is all accounted for in the range of our guidance.

Regarding SG&A, as I shared in my opening remarks, our recently announced corporate restructuring designed to support strategic priorities and long-term growth is expected to result in savings in nonadvertising spending in fiscal 2026. We expect each of our segments to deliver both top line and segment profit growth in fiscal 2026. And for further segment guidance information, please refer to our supplemental slides on our Investor Relations website.

From a cadence standpoint, we expect Q1 earnings to decline compared to prior year, mainly due to timing of the impacts of pricing, commodity input costs and some lingering impacts from our fourth quarter. We believe our full year guidance range is achievable and realistic. It demonstrates the value of our balanced protein-centric portfolio and positions us for sustainable long-term growth.

With that, I will turn the call over to the operator to begin our Q&A portion of the call, and we look forward to your questions.

[Operator Instructions] Your first question comes from the line of Michael Lavery from Piper Sandler.

You touched on some of the cost expectations and how the T&M initiatives would be continuing and some of the other administrative savings. But could you maybe just unpack guidance a little bit further? And give us some of the key puts and takes to keep in mind, and just how to think about feeling that on in a little bit further?

Sure, Michael. Thank you very much. This is Jeff [indiscernible] you're answering. So we'll start on the top line where we said we expect organic net sales growth of 1% to 4%. We already have substantial momentum on top line, and with all 4 quarters last year, generating top line growth and driven by all 3 segments and expect that kind of momentum to continue.

As John described, we think our protein-centric portfolio, coupled with our presence in both retail and foodservice puts us in an advantaged strategic position. In terms of other specifics that will help the top line in fiscal 2026, we'll be benefiting from the pricing actions that have already been taken place, but some of which kind of roll in, in Q1, or at the very beginning of Q2. And then we also will have enhanced marketing support, and we've been on air already supporting many of our key brands.

When it comes to the bottom line, we've guided to adjusted operating income growth of 4% to 10% with the midpoint of a 7% growth in fiscal 2026. We have taken several steps to help our bottom line performance catch up with our top line momentum. So first of all, there is that pricing flow through, which will better match up with costs as the year goes on. Secondly, we expect to drive mix improvement and the marketing focus will help us to do that. Third, we do expect continued benefits from the [ T&M ] program. Fourth, we have the savings from the restructuring work, and I'm sure we'll be able to provide more details about that in further questions on the call here this morning. And then lastly, we do expect some relief from pork costs in this particularly in the second half of the year, although we're still facing some headwinds in beef and [ nut ] costs.

So overall, I mean -- I guess our theme is we believe our guidance is realistic and achievable and demonstrates the value of our balanced protein-centric portfolio.

That's helpful. Great color. And can I just add a follow-up on portfolio reshaping. You touched on in the prepared remarks. And I gave a couple of examples. It sounds like -- is that more of a starting point in that you would be doing a bit more review there? Or how would you sort of assess maybe some of what you've just announced versus what may still be to come?

Michael, this is John. I'll take that question. So thank you. Yes, portfolio reshaping certainly is an ongoing effort for us, and it's a strategic one. We continue to look at strategic categories and brands, and making sure we're building our portfolio around our growth ambitions. And also importantly, looking at how do we simplify our operations. Really, all of it is about positioning Hormel for sustainable long-term growth. So if you think about simplifying operations, that includes exiting nonstrategic businesses and ensuring we have the best owner for our brands and product lines.

The example I mentioned earlier around [ Justin's ]. [ Justin's ] is a wonderful brand, but a better fit in the hands of the strategic partnership that we've created. Given its overall size, the opportunity it has for growth in confections, which is a nonstrategic category for us, was an opportunity that we saw. So I would say, overall, our actions reflect a deliberate strategy around portfolio shaping, all intended to streamline and position our company for sustainable profitable growth, and allowing us to really focus on that premise I mentioned, which is nourishing protein solutions.

Your next question comes from the line of Tom Palmer from JPMorgan.

Jeff, in the prepared remarks, you said you expect stronger Turkey markets in your guidance. I just wanted to clarify around that since there are several Turkey products you sell including ground turkey, where there was some pricing midyear and then [ deli meat ].

What are you assuming in the outlook for whole bird pricing? Spot price is obviously up quite a bit. but I think you still have contracting to finalize over the coming quarters. So I think at times, you guys have indicated it might be too early to embed much change in guidance until you start to capture it in contracts.

Okay. So this is John. Tom, I'll jump in on that one to just talk Turkey a little bit. I'll kind of pull back overall on Turkey in general for us and kind of come down to some of the areas you're touching on.

So first, Turkey continues to be a very important business for us, very important for the consumer. And in particular, our focus around value-added turkey, ground turkey continues to be a winning formula for us. From a consumer demand standpoint, ground turkey, in particular, is a great option for consumers. Very versatile, plugs in very well to everyday life, different food experiences, different meal experiences. So in terms of creating value in a strained consumer environment, we love our ground turkey business.

Second, I'll comment that there certainly has been some volatility in the markets in the industry. You'll recall that in 2025, we saw a run-up in costs in the first half of the year around Turkey. In our supply chain, we said we needed to take price. We did that. We implemented pricing actions in the back half based on that inflation that we saw. We actually weathered that pricing well on our ground turkey business, driving both top line growth, market share improvements and profit recovery. So we're managing the volatility well, I would say, coming from a position of strength with Jennie-O. As we support the brand well, serve our customers well is absolutely critical. That being said, the markets have continued to fluctuate, certainly, that does impact our pricing.

And coming to your point around [indiscernible] in particular, I would say, our guidance, our expectations for the year include somewhat elevated [ whole ] bird prices throughout the year. Although I will point out to your question, it's early and very little is settled at this point in terms of the market. We still need to see sell-through from this holiday season as one factor in that. So that's the position of where we're at now. And again, from an overall standpoint, we love the Turkey business, consumers looking for lean protein, our ground turkey business continues to be a winning business for us that we're going to drive.

Great. And then maybe this question will catch you off guard. But I wonder if you might share a bit of the expected savings from your restructuring work?

This is Jeff. I didn't answer your last question. So I owe you this one, right? So as we talked about, we made the difficult but responsible decision to reduce expenses, ultimately resulting in a 250 position workforce reduction, which is about 9% of our corporate and sales group.

Significantly, the other aspect of this that we focused on was really making sure we had the right organizational structure going forward. We were able to reduce layers in many areas, and we also targeted expenses, including certain benefit programs. This work has resulted in meaningful savings and will free up capacity for growth objectives and our company initiatives.

We designed the program to deliver gross savings in the range of 2 to 3x our expected cost to implement, and we expect that the payback timing will be quick within the first 12 months, although in terms of quarterly cadence, it doesn't really kick until the beginning of the calendar year. So the first 2 periods of Q1 really don't have this benefit.

I also want to point out that you won't see all of this flow through as a direct reduction in SG&A because some of these gross savings are being reinvested in people, and brands, and technology. Some of the benefit actually gets reflected in cost of goods instead of SG&A. And some will cover incentive resets.

Let me also pass over to Paul to give you a little more specific for modeling purposes.

Yes. Great. Thanks, Jeff. All in, the work we've done for SG&A has allowed us to anticipate adjusted SG&A as a percent of net sales comparable to the prior year, inclusive of meaningful step-up in marketing and advertising investments. Maintaining prior year rates of spending while reallocating resources to what will drive our brands and company forward in the best way is an important lever to our growth story for fiscal '26 and beyond.

Your next question comes from the line of Ben Theurer from Barclays.

A lot to digest [indiscernible], but I wanted to go back into some of the comments and the outlook more particular as it relates to Planters. So obviously, you've taken some decisions within the [ nut ] business on the private label side. But just wanted to understand where you are in terms of the journey of recovering on Planters of what you've lost in terms of -- where are you in shelf space? Where are you on the profit side? Just to understand how we how we should think about the cadence into fiscal '26 of further delivering from the Planters business? That would be my first question.

Great, Ben. I'll take it. It's John. Yes, Planters continues to be a very important brand for us in our portfolio, and we are very bullish overall on Planters going forward. Last quarter, I mentioned that we had started growing Planters again. And now I'm very pleased to say that we are fully back in growth mode behind Planters. And I mean that both in the near term as well as in the potential we see for Planters in the longer term.

So when I talk about the near term, we are clearly delivering the gains we expected to see in the marketplace. I'm pleased to report that in the latest 13 weeks of consumption data, we've seen Planters plus 12% in dollar consumption, and plus 6% and in volume consumption versus prior year. This is largely, to your point, driven by distribution gains. Distribution is up 13% versus prior year in the latest 13 weeks, and base sales are up over 10%. So the specific question around distribution, our distribution recovery is just about complete at this point. We are nearly all the way back to where we were prior to the supply disruption, and we are gaining share in the growing [ snack net ] category.

I also mentioned last quarter that our top line momentum is good. Our consumer recovery is on track, but our profit recovery has been somewhat hampered. That continues primarily driven by mix shifts related to consumers trading out of [indiscernible]. You may recall that last year, [indiscernible] saw significant price increases that were precipitated by commodity inflation. We love the fact that we have a brand and an equity with the Planters franchise that's big enough to keep all those consumers in the franchise as they trade among nut types, but that does drive some mix implications for us from a profitability standpoint.

So as we go forward, we'll continue to build on that top line momentum. We are going to begin lapping that [indiscernible] pricing in the second quarter of 2026. And we are adjusting our go-to-market plans to take advantage of our broad portfolio, to drive more favorable mix. And we continue to focus on our 3-part plan that we've talked about before. Attracting consumers to the brand, stepped up communications and advertising, strong in-store promotions, increased focus on our exciting innovation that's proven to be highly incremental to the brand and the category. And we just continue to love Planters as a snacking platform as consumers are migrating to snacks with substance, snacks with protein. We love the fact that we have this leading brand in that space.

Okay. Perfect. And then second, I mean, obviously, you've done a lot. We had some impairment charges within your international business, which you've highlighted was Indonesia related. But within International, you called out the dynamics in Brazil, the challenges down there. So we know it was a venture. It was a relatively small business. But given some of the initiatives you're doing in terms of portfolio review, we've seen the [ Justin's ] thing. I mean there's a lot just going on.

So how should we think about that the venture in Brazil. Is that still part of you want to be there? Or is that something you would be hoping to put up for sale to literally have either cleaner story maybe on the International business with more of a focus in Southeast Asia, Asia, and not so much with the venture as well in Brazil that has been costing, I guess, more headache than smiles? So just your take on Brazil, that would be appreciated.

Yes. Sure, Ben. It's John. I'll take that one, too. Look, I would say just a couple of general comments about our international business.

Number one, our China business does continue to perform very well for us. That is a strategic priority. It's a focus. Two, we have seen good success on our branded export business headlined by global SPAM. That continues to do very well for us.

To the questions around what's held us back? Certainly, there are parts of the export business in terms of more commodity-type products that have been more of a struggle recently. And then Brazil, for sure, has been a drag in terms of our overall performance.

To come to your question around portfolio, certainly, my earlier comments where everything is under review. We do continue to look at our portfolio in total for what makes sense, what doesn't, and we'll continue that process as we go through 2026.

Your next question comes from the line of Heather Jones from Heather Jones Research.

I guess I wanted to start with the assumptions on raw material input costs, specifically pork. So it seems like the recovery and productivity for the industry from disease is trending above expectations, and we could -- we're set up for decent supply growth in '26. So I was just trying to get a sense of you said above the 5-year average, but below '25. But I was just wondering if you could give us a little more detail as far as like how you're thinking about the year-on-year decline in raw materials, particularly given how much [ bellies and trim ] have already retrenched from the summer highs?

Yes. Thanks, Heather. This is Paul. The first quarter has begun, pork, trim, beef remain at a headwind year-over-year like you mentioned. We have started to see some year-over-year [ beef in bellies ]. We have announced also targeting pricing actions to address the markets. And foodservice, there's no changes to our pricing.

We do have beef and [ nut ] headwinds as we look at the full year of fiscal '26 in our guidance. And then to your point, improving pork benefits in half 2 is kind of what we've modeled internally.

If I could add, Heather, this is Jeff. Just kind of further response to your question. There's modeling for the whole year that obviously we need to do. But one of the things I think we've realized over the last 3 to 4 months is we really need to be more real-time responsive to changes in the market. So in response to this heightened market volatility, we're refining some of our processes to drive greater agility and forecasting and managing commodity risk.

One example would be we're going to couple our external forecasting sources with some of our real-time internal knowledge about factors affecting the commodity markets. So we can predict what we think will happen in H2, and how much recovery there is, but we need to be better than reacting to what really goes on.

That's helpful. My second question is just -- you have a number of tailwinds going into '26, whether it be potentially lower raw material cost in pork, the turkey markets, the lapping of nonrecurring things. And you mentioned the headwinds of beef and nuts, and you're going to raise your advertising spend.

But just wondering, as you were putting together your guidance and all, just if you could give us a sense of how much the consumer environment factored into your into your outlook? Like are you assuming a still tough consumer all the way through '26? Or just how are you thinking about food service traffic and -- just -- I know it's a really big question, but just trying to get a better sense on how you're thinking about demand?

So big, Heather, it's going to take two of us to answer. I'll start, this is Jeff and then John will talk about the consumer.

I do want to give a little more color to all of you on the call today about cadence. So we do expect Q1 earnings to be pressured still compared to last year, and we're actually looking at probably $0.02 to $0.04 below a year ago as a realistic range because we still have spillover effects on the bottom line. In terms of the pricing actions, they are not all fully implemented in Q1. In terms of the commodity input costs, as you correctly point out, they started to come down, but they do remain elevated. We have some turkey supply issues still from the turkey illness issues. As I mentioned a minute ago, we have the timing of the SG&A benefit, which will help us through the year, but not particularly in Q1.

So although we expect Q1 earnings to be pressured compared to last year, we then are confident in our growth guide for the remainder of the year. But it does pull down the full year in terms of how that factors in.

On the consumer side, John?

Yes. So -- thanks, Heather. I'll talk a little bit. I mean, I think the consumer environment, I would still say the consumer is quite strained. Feeling the cumulative effects of inflation, feeling some of the uncertainty in the macro environment, consumer sentiment remains quite low. So as we look out to 2026, I mean, we are factoring that into our guidance, meaning we expect the consumer to continue to exhibit value-seeking behavior throughout the year. We believe our portfolio is well positioned to provide value in a number of different ways.

From a foodservice perspective, aligned with external forecasts, we expect flat to little growth in the foodservice industry in total. But again, we love our solutions-based portfolio. We love our foodservice model in terms of the channel diversification we have across small and large, across different types of channels, across commercial and noncommercial. So we love our channel resilience. We love our direct sales force. We love the types of solutions we provide to operators who value our partnership even in difficult times when traffic is down.

So we feel like we have a good set of answers to the challenging environment, but we are modeled and forecasting a continued difficult environment from a consumer standpoint throughout 2026.

Your next question comes from the line of Pooran Sharma from Stephens.

Thanks for the question. I was just wondering if maybe you could give us a sense of kind of how much you're planning to invest back in the business. I know in terms of T&M, and I know you're walking away from giving T&M targets going forward. But what you had given in the past was $75 million in FY '24, and then $100 million to $150 million in FY '25. I was just wondering if you were able to give us a sense of how much of that you were planning to -- you had invested back into the business? Or just give us a sense of of how much reinvestment you're planning to drive back into the business?

Yes. Thanks for the question, Pooran. And I think, again, I'll -- this is Jeff, and I'll start and John will conclude on your question.

So I do want to point out on T&M. So this is the final year of our current program. It doesn't mean we've made any permanent decisions about where we go from here. And it really has played a critical role and delivered significant value to the company. We have continued efforts scheduled for this year, a number of specific projects. But we have found that breaking out the financial benefit separately, it seems like it hasn't been particularly helpful and in some cases, has caused confusion. So we're not providing that breakout, but we do expect to see financial benefits in 2026. And they'll kind of be spread between the marketing enhancement that you're asking about. We're also going to use some to offset continued inflationary pressure and then hopefully to allow us to expand margins.

I'll hand it over to John then.

So in terms of how we're thinking about that reinvestment behind our brands. We're spending largely, in a concentrated way, behind our focus brands. There's a couple of points to that. One is, think about our brands like Planters, SPAM, Jennie-O as well as critical innovation that we know is important in the market to deliver that value for consumers right now. Driving our investments behind those brands is one of the levers we have to drive positive mix into 2026, and create some of that margin momentum.

Second, I will say on those businesses, we do have a very good handle and analytics around return on investment behind those marketing investments. And most importantly, at this moment is it's absolutely critical that we support our brands through the pricing. We know that the consumer is strained. We know that we've taken multiple waves of pricing that we've talked about. It's inflation-justified pricing, it's needed, but the consumer is strained. And so our ability to support our brands well through those pricing actions is actually for us proven to be the recipe for success, to successfully implement those pricing actions and to be able to continue the category and brand momentum we want to see. So that's how we're thinking about our stepped-up investment into 2026.

Great. Great. Appreciate the color there. On the follow-up, was maybe just hoping to dive into cadence, just a tad bit further. I appreciate the color you just gave on 1Q. And just thinking about [ 2Q ] through 4Q, and the recovery in FY '26. Is it more of like a gradual recovery where you're going to see a sequential recovery quarter-to-quarter from 2Q to 4Q? Or is it more of kind of like a step-up in the back half, and just a little bit of recovery in 2Q? If you're able to just provide any color around that would be helpful.

Sure. Thanks, Pooran. This is Jeff again. Yes, we do expect after the first quarter challenges to see an acceleration of benefit. Realistically, as you get to Q4, you're now against a quarter that, as we talked about, had $0.03 of onetime incidents. And so that clearly should be a more beneficial quarter. So the middle ones will be more modest increases, and then Q4 should be more substantial.

Your next question comes from the line of Leah Jordan from Goldman Sachs.

I just wanted to go back and dig in a little bit more on Heather's second question. Given the fact that you're planning for revenue growth in each of your segments next year, just seeing if you could talk more about the drivers between price and volume for each segment?

I mean we've got some pricing in retail, but there's maybe some lower cost that will come through in the back half and we've got the quicker pass-through on foodservice. So just how should we think about those elements in the mix of a more challenged consumer environment?

Thank you Leah. This is Paul. So on the segment detailed guide, all in for fiscal '26, we expect retail to have modest declines in volume with low single-digit increases in net sales. Foodservice will have low single-digit increases in volume with net sales in the mid-single digits. And then international also expecting low single-digit increases in volume with high single-digit increases in net sales. And as Jeff has stated, segment profit growth by all 3 segments for the course of the year.

Okay. Great. And then maybe just some comments around the competitive overall across your categories in retail. I mean what are you seeing from peers as you start to put through some targeted pricing in some areas? And then -- but you're also kind of planning for incremental brand investments as well. So just the competitive environment overall.

Yes, sure. I can take that. This is John, Leah. From a retail perspective, we do feel very good about the top line momentum we're seeing across the retail business despite what is a choppy and competitive environment, and that strained consumer backdrop. When you look at the drivers underneath that consumption performance, you can see in the scanner data, our flagship and rising brands continue to perform well. In the latest 13 weeks, they were up 3.7% versus last year. That carried our total Hormel portfolio to over 1% consumption growth in the latest 13 weeks.

Some of the standout performers, Jennie-O ground turkey, where we're up double digits. We're certainly pacing ahead of the competition. Planters back to double-digit growth, also pacing ahead of the competition. We're seeing good strong growth in our rising Mexican brands, [indiscernible] and [indiscernible] grew 7% and 5%, respectively, Applegate continues to grow. So we like our portfolio. We like the momentum we have on retail.

We have taken, as we've talked about multiple waves of pricing action. We -- in the last quarter call, we talked about that we had announced a [indiscernible] pricing, that we were going to monitor if we needed additional pricing. As we got deeper into the quarter and saw the markets continue to rise, we did, in fact, announce another [ wave ] of pricing, which largely will benefit us in the second quarter.

To your point around how do we maintain that momentum, how do we feel competitively? We're going to continue to invest in our brands. We're going to continue to invest behind our core brands, as well as our innovation to weather that competitively. And all in all, we certainly see competitive activity in some of the categories that is aggressive, but we feel like we have good differentiated positions. We know where our growth is needed to come from, and we're going to continue to invest in those spots.

Your next question comes from the line of Max Gumport from BNP Paribas.

I was hoping for an update on tariffs, particularly if there are any expenses, particularly such as those associated with [indiscernible] that you incurred in FY '25 that might not repeat in FY '26 due to recent exemptions? And then if so, if you could quantify that impact for us?

Yes, Max, this is Paul. Thanks for the question. Overall, a message on tariffs. Really, we feel that we're fairly insulated. Obviously, the global environment remains dynamic and it's ever changing. For '26, the range that we think that we'll have on tariffs is $25 million to $35 million, and it's mainly related to supplies and steel and aluminum.

Obviously, we were watching [indiscernible] until the recent announcements of the removal of reciprocal tariffs. We haven't really quantified that exact amount that we had in '25 to give you a range on the '26 question.

Okay. I think that [ 25 to 35 ], is that roughly in line with the total tariffs that you saw on your P&L in '25 [indiscernible]? I think you had quantified a $0.01 to $0.02 impact, I believe, in the second half of '25?

Yes. So on a full year basis, that is correct.

Okay. Great. Then that takes me to my second question, which would be -- I still think there's plenty of discrete items you have in fiscal year '26, that will be a help to your profit growth. So you've mentioned admin savings. I think you said it was 2 to 3x the cost to implement, which I think is $20 million to $25 million the cost to implement, but correct me if that's wrong. But if that's right, that would be, maybe at the midpoint, roughly $60 million in savings.

Now all of that is going to flow to the bottom line. Some of it gets invested, but I just assume half close to the bottom line, that's $30 million in profit growth. You've got the chicken recalls that you're lapping, the fire at the [ Little Rock ] facility that you're lapping. So that's another $20 million or so in profit growth. So now we're at $50 million of profit or growth. Your guidance is for $40 million to $100 million. And we've also got a benefit coming from T&M, again, some of which gets reinvested, but some of which would flow to the bottom line. And then [indiscernible].

So I was hoping just to get a bit more color on sort of what's -- what am I missing? What's dragging you down? Is it other forms of inflation that [indiscernible] and nuts? Just one, just given these discrete factors, I'm trying to get a better sense of what might be holding you back and sort of keeping the low end of the range at 4% [indiscernible]

All right. I'll start, Max, this is Jeff. I mean -- you're correct that the $20 million to $25 million number in terms of the onetime cost is what we've reported. And so your math of the 2 to 3x works in that regard. And you correctly pointed out that, that ends up being the total available savings, but then we are going to be reinvesting part of it in certain areas.

I think a couple of other factors that we probably could point out to you that might mitigate your math a little bit. One, I'll remind you again about Q1. So we start out the year in somewhat of a [ hole ]. So the implied rest of the year is quite a bit higher than 7% then. And so that does factor in some of the advantages that you're citing.

Secondly, I mean, I think the other thing that maybe models miss that we've talked about in the past is in the pricing area that while we're in a reasonably good position to be current to the cost on the foodservice side with some lag. In retail, it's a more complex decision and there are cases where, okay, if we're -- yes, the costs are up this much, but if we price to that same equivalent amount, is going to really harm the long-term future of the brand. There are times where we've chosen not to do that. And so some of the math factoring into how we think '26 plays out, has that factored in as well.

Your next question comes from the line of Rupesh Parikh from Oppenheimer.

This is Erica Eiler on for Rupesh. So I wanted to dive a little bit deeper into gross margin. So obviously, under pressure here in Q4 because of some of those discrete items. But maybe you could just walk us through some of the high-level puts and takes, how you're thinking about gross margins for the year? Maybe -- and in terms of cadence, how we should think about the recovery there?

So when you think about the gross margins for the year, I think obviously, we've got, in '25, like you mentioned, we obviously had impacted by the commodity inflation with 500 BPS year-over-year in Q4 alone. The chicken product recall and the [indiscernible] fire obviously drove that as well. Planters top line is performing well. But as we said last quarter, we're balancing some mixed dynamics on profitability. So those are really the margin dynamics in '25.

As we look in '26, we obviously got gross margin expansion with mix improvements. A lot of pricing flow through over the course of the year in different waves that John has already described on the call here. And then we've got T&M savings going forward as well in the final year of the transfer and modernized project.

Okay. And then just on inventory. So I think inventory was up about 11% in the quarter. Just curious how you're feeling about the health of your inventory from here?

Yes. Great question, Erica. Overall, we feel very comfortable with our inventory levels. And as you note, they are up year-over-year, but they actually went down in the fourth quarter. The biggest driver of that increase in inventory is the commodity markets that are boosting the balances. And then we made strategic decisions on pounds to increase for the center store business for the colder months and weather events. And then lapping last year, we also had the Planters [indiscernible] plant, and so we've got a replenishment there. But overall, we feel very comfortable with where our inventory levels are today.

Your last question comes from the line of [ Yasmin ] [indiscernible] from Bank of America.

Can I just ask on Turkey specifically. So we know that Turkey was a $0.25 headwind to fiscal '23, and then roughly a $0.15 headwind to fiscal '24. So could you just help us bridge the '25 impact? So what was the full year Turkey headwind or tailwind to earnings in '25?

Just to give you a little bit of color on Turkey. So I mean, in general, we saw a lot of, I'll say, increased costs in Turkey in 2025. We were able to land on our ground turkey business, the pricing we needed to, to cover that in terms of how that played out for the year, those first half pressures really hit us quite hard, and we were able to balance that back in the second half and offset those first half headwinds with the improved results in the back half.

In terms of whole birds, they did come in somewhat better than expected compared to our original outlook from fiscal 2025. But it was obviously a very, I'll call it, volatile year on Turkey. And we weathered it quite well from a competitive standpoint and the recovery in the back half of the year. All in, it was a benefit in 2025.

Okay. Great. That's helpful. And then on raw materials inflation, you had said last earnings that, I think, 3Q was roughly 400 bps. How much was it in 4Q? And how should we think about it in '26 on a quarterly basis, given there's typically some seasonality there?

1

Yes. Thanks, [indiscernible], for your question. In quarter 4, was the 500 basis points of raw material cost inflation during the fourth quarter. The second part of the question, I direct you to Jeff and have any more internal discussions there.

There are no further questions at this time. We have no further questions at this time. So I'll turn the call back to Jeff Ettinger for closing comments. Sir, please go ahead.

Thank you very much. Since we're already running [indiscernible], I just want to express my thanks to everyone for taking the time to follow us today.

Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.

All right. Well, welcome back. Good afternoon. Thanks for joining us. Next, on stage, we have Hormel Foods, a global branded food company, approximately $12 billion annual revenues across 80 countries worldwide. With us is Jeff Ettinger, Interim CEO; John Ghingo, the company's President; and Jacinth Smiley, EVP and CFO.

Now clearly, Jeff, Jacinth, John, it was a rough last week on earnings. So maybe let's just start off discussing the most recent results and all that transition we have to go through, short-term challenges, obviously, and how you hopefully can turn those into some of the opportunities. So could you just give us summary, positives, negatives of what was the issue in the third quarter and how you think you're currently set up for the fourth quarter, just given the outlook you provided last week?

Yes, I'd be happy to take that, Ben. And first of all, I just want to thank you for having us. It's been 9 years since I've had the opportunity to be at this conference, and it's still an excellent one, and you get great attendance. So I appreciate that. Obviously, going into the quarter, the team had expected to be able to drive both top and bottom line growth and understand that long term, that's the mission at the place. As the quarter turned out, we kind of got halfway there. I think the top line, frankly, got a little bit missed in the sense that we definitely missed the bottom line. We're going to talk about that in a minute. But the top line was 6% growth, volume growth as well on top of growth in the first and second quarters as well. All 3 segments, retail up 5%, food service up 7%, international up 6%. I don't think you're hearing a lot of those kind of growth numbers maybe in the session here.

So we're proud of that, but we also understand that, look, when it came to the bottom line, the kind of cascading cost pressures that we ended up being confronted with during the quarter overcame our ability to deliver that on the bottom line. They went up steeper and faster and have lingered longer than we had anticipated. And even if we had anticipated them the way pricing works, it takes roughly 60 days in the food service part of the business, up to 90 days in the retail part of the business. And so that's a work in process. The team understands they need to be doing that and are working toward that.

In terms of the outlook for Q4, there's a hangover effect to that. As I mentioned, the 60, 90 days haven't run yet. And so we're seeing a similar outlook for Q4, good top line, a little bit pressured on the bottom line. And while we didn't give guidance on the recent call last week for '26, we did give kind of an early read, and we are optimistic at this point as to why we should be able to drive both the top line and the bottom line in 2026, and we can get into that a little more as the conversation goes forward.

Okay. So you talked about the input cost challenge. And clearly, it was the speed and kind of like the magnitude of the increase that maybe was a little more atypical. So as you kind of like see that still at an elevated level, but coming down a little bit, how does that set you up from just like a sequential point of view from a profit outlook?

Yes. So if we think about the fourth quarter, as we talked about on the Q3 call, our expectation is certainly that we are going to continue to see elevated markets and markets have remained elevated going into the fourth quarter. And so the reason we have had this pullback and in our mind, a realistic view of the rest of the year is for that reason.

So we feel confident in the guide that we gave on the Q3 call relating to Q4 for that reason. We have built up inventory. So when we think about the commodity markets and the run-up in markets, during that period, we have been building inventory. So even with markets coming down, if they did, then we're not going to see that benefit really show up in the fourth quarter because of the inventory that we have already built. That being said, I mean, that will flow over into the new fiscal year.

Okay. And then, I mean, you talked about it, Jeff, the pricing piece and pricing component, some of the delays here. So as we think about it, the initiatives of the magnitude of price increases that you have to take, just maybe walk us through, give us a little bit of more clarity into like which segments, which areas you think you have more ability to set pricing without challenging too much of the elasticities to kind of like get down on the volume. So -- and what kind of like the magnitude of pricing, is it stacked? So how should we think about these pricing actions over the next, call it, 3 to 6 months to kind of like offset these input cost pressures?

Yes. I'll take that one, Ben. So thank you. And obviously, pricing is a critical topic right now. If you step back and look at our business, some of it is not really much of a decision to be made. Our food service business, for example, a lot of that pricing is what we would call pass-through pricing, where the prices are moving up and down with those market movements. And that's happening automatically, obviously, when the markets are running up and our pricing is following that, there's some margin compression that will happen in the short term in those quarters where we're chasing that. And as the markets eventually ease, prices come back down and we'll recoup and restore the margins on the business, right? So that's the pass-through model.

On retail, our pricing challenges are fundamentally different in 2 ways. One, as Jeff mentioned, the lag time tends to be longer. So it takes us longer to implement those pricing actions through our retail partners. But two, there are more strategic decisions that need to be made. And I'll start off by saying with the consumer sentiment where it is and the backdrop, these are very difficult decisions. They're always difficult. They're even more difficult right now because we're triangulating across 3 pieces. One, we are looking at commodity markets, inflation in general, the pressure on our cost of goods.

We have to look at that and see what we need to cover from a margin perspective. However, there are 2 other critical pieces. How much pricing can the consumer withstand is a critical question, and that varies by category. And then also, what is the strength of the brand, to your point, in that category that we have and how are we supporting the brand. And so what we're doing is we're making what I would say are very measured, thoughtful strategic decisions regarding how much price we can take and where -- so the pricing actions we announced in the third quarter when we saw markets running up, we were largely focused on the parts of the business that were impacted.

So think about items that are made with pork, pork trim, pork bellies, beef is certainly very, very high. So those are the items. And we're seeing the need to take that pricing both in the refrigerated parts of our portfolio as well as in the shelf-stable or center store parts of the portfolio. So those pricing actions that were announced in Q3, taking hold in Q4 will begin to have a more significant impact in 2026. We also mentioned last week that we are evaluating additional strategic pricing actions that could potentially be announced in Q4 for 2026 based on where the markets continue to sit at that elevated state. So if you look at our business, right, when we have things lined up well, and I'll use the example of Turkey.

So in the Turkey business in the second quarter of this year, we saw a quick dramatic run-up in our supply chain costs across the board in Turkey. We needed to take a significant pricing action that we announced in Q2 that really hit the market in Q3. That was behind our Jennie-O ground turkey business. Now in that case, we have high-quality brand, #1 brand in the category, well-supported brand, strong execution. And even though we needed to take that pricing because it was inflation justified, it was still difficult to get done. We were able to actually do it successfully. That business in the third quarter grew consumption double digits.

Category remained healthy, which is critical for us. We want to see the category continue to grow, which it did, and we were able to recoup that margin. So that's the approach we're taking across the board is really focusing on where our brands are strongest, where they're well supported and where we can continue momentum in the category. What we don't want to do is we don't want to take consumers out of the categories. We don't want to push consumers out of our brands. So we're finding that balance of how do we continue the top line momentum, continue consumption momentum, which we saw in the third quarter, but cover as much of the commodity inflation as we can.

Okay. Got it. So maybe we'll leave it here with a short-term backward looking more on like the general market, medium-term and long-term opportunities. Jeff, John, so you kind of like both in the new role, a new old role, if you want to call it this way, and then you obviously, as President. So maybe, Jeff, for you, now back in that interim CEO role, you're going to work together with John for the coming quarters. So what's going to be your predominant focus during that period of time? And then maybe passing it on right after then to John, what he's going to be mainly focused on, how you're going to work together to kind of like move Hormel forward over the next 12 to 15 months?

Great. Yes, I'm excited to be partnering with John. The Board -- I rejoined the Board of Directors of Hormel in March and then asked if I could work with John for a period of about 15 months here. We bring different, but I think complementary backgrounds. I'm kind of a career Hormel guy. John has been in mainstream food industry with Kraft, Mondelez all over the world. He's been in more of the new age food spaces, if you will, with WhiteWave and with Applegate for us. He's been in the private equity space. And so he knows Hormel, but he also knows the industry more broadly. And so it's a good opportunity to work together with that. The Board also asked me to do it, I think, in part because I had just finished about a few months ago serving a different interim role. I actually was the Interim President of the University of Minnesota. And I learned in that role. I've never been an interim before, but it's very focusing.

It's like, okay, you have a year. And so it makes you focus in on what kind of impact can you create during that year. And so Ben, that's kind of my take on it, okay, what areas can I add some value during the year. We've been trying to reemphasize to the team the importance of goals, the importance of hitting those -- in our case, it's 2% to 3% net sales growth, 5% to 7% operating income -- every unit, every quarter as often as possible, to make sure that the team looks at that and knows that that's what's expected. I've been looking hard at the building blocks for a successful 2026. And given that we already talked about our top line is in pretty good shape.

You can't take that for granted, but it's a lot of emphasis on the bottom line. And so there's a number of things there, including our T&M initiative that Jacinth, I'm sure will talk about in a bit. But one of the other areas we talked about that I will definitely be focused on what the others up here and the rest of our team in the next 90 days, we talked during the call about a review of our SG&A spending. We've seen that spending go up nearly $100 million in the last couple of years against flat -- what turned out to be flat sales. And so we think there are opportunities there to rightsize that part of the portfolio, and we want to get on with doing it. It's fair to the team. It's fair to putting us in the best position possible for success in 2026.

And I guess, then I'll add a little bit on my kind of approach to this. So first off, I would say I rejoined Hormel just 1 year ago this week. And I came back to the company for 2 big reasons. One is because of the potential I saw in the portfolio, very unique portfolio in the industry. And two, because of the people and the culture. And so it's been a pleasure working here early days with Jeff, but his deep understanding of the company, the culture and all of our various stakeholders has been extremely beneficial to me. So it's been a good partnership out of the gate. My big focus, if I had to put a headline on it right now, is just making sure we have the right strategic focus as a company, both in the near term and in the long term. And I think we need to get a lot more value out of our portfolio and extract a lot more value out of our portfolio. We're beginning to do that. There's more runway to continue to do that.

If you look at our unique plot in the industry, we are a packaged food company and we're a meat company, we're a protein company. But we're not selling commodity protein is not our game. We're selling value-added proteins. So we have protein-centric portfolio, which is very much on trend with what consumers are still moving toward. We actually have a great breadth of proteins when you look across different animal proteins as well as nuts and nut butters. And then we have a great ability to convert to a lot of different occasions for consumers through convenience, through easy prep, through flavor and taste and through what I would call fuel and nourishment that we provide through our proteins. And so if you look at our food service side of our business, our retail side of our business, we cover a lot of occasions, breakfast, lunch, dinner, everything in between from a snacking perspective is ripe for us, right? So I look at the power of that portfolio in the industry right now, and I think it's a really, really unique plot.

That being said, we need to modernize. We need to be updating our portfolio. We need to be renovating our brands, innovating into some of these bigger consumer spaces, which are very, very attractive, but there's a modernization that we're on the journey. We need to continue on that journey. And then the second piece of it is modernizing the company. And so we've talked publicly about our transform and modernize initiative, which is yielding some efficiencies and savings. But what it's also doing is it's helping us update everything from our data, our processes, our systems, our ways of working, our culture. So my focus in this time period right now is to make sure we're laser-focused on the right strategy to start bringing the benefits of this modernization, both internally and externally to the marketplace and make sure we're positioning our brands and our portfolio for the longer term as well.

So you talked about the portfolio strategies of just staying along the lines of those. Consumer, obviously, as you also said, somewhat challenged, right, with general inflationary pressure, et cetera. So as you think about your portfolio within the broader market context, what aligns already today? Where do you need to make investments? So just like general like kind of like how can you connect the dots, if you want to put it this way, between what is your portfolio and what the consumers want and where the demand growth and where growth is actually in -- on the consumer side?

Yes. That's a great question. I guess I would start with the consumer mindset. There are a few words I would use right now to describe the consumer mindset. One is strained. One would be cautious, strained from the standpoint of the cumulative effects of inflation have kind of piled up on consumers over time. It's really mounted to something quite significant. Two, in terms of the outlook into the future, there's uncertainty, right? And that adds to the strain. It adds to what would be a cautious consumer behavior and sentiment remains very, very low. So we saw a little tick up in our tracking on consumer sentiment in July, and it dropped right back down in August. So consumer sentiment because of the uncertainty and because of the cumulative effects of inflation remains quite low.

So now you put that in context and what does that look like? How is that impacting our business? So food service, which has been a historical growth engine for us and continues to grow. But certainly, traffic is down in the foodservice industry. And if you look across channels, it's down pretty broadly, whether you look at QSRs, college and university, health care, convenience stores, which we classify as foodservice, all of those channels are under traffic pressure. Consumers are just not going to those channels. We expected some bounce back in the spring and summer that we frankly haven't seen. So that's on the foodservice side, it's industry pressure. On the retail side, what that looks like is consumers making tough decisions every day over what they can afford to and want to pay for to put in their shopping basket. And so in some cases, that means consumers are trading down to lower-priced alternatives.

And we have certainly seen broad-based and significant growth from private label at lower price points across a lot of different categories in the industry at large. But consumers are still seeking value in different ways. And that's where our portfolio really fits in, and we need to be laser-focused on meeting those needs for value. So if you think about how consumers -- when are they willing to pay? They're willing to pay for time. So when we can be more convenient, when we can have easy prep in the kitchen and we can give them back time, they will pay for that convenience. If we can bring a really unique flavor and food-forward experience through our brands and products, they will pay for that. If we can bring some kind of a fuel stop, a nourishing snack in the midst of a busy day, consumers will reach and pay for fuel.

So our portfolio is, number one, well positioned to take advantage of some of those definitions of value and the consumer momentum in those spaces. We talk about our flagship and rising brands. That's how we talk about it. Those are the brands we distort more investment to more resources to for growth. So why do we do that? Well, our flagship brands are our 5 largest brands where we see significant consumer opportunity. They're advantaged businesses for us. Our rising brands are also sizable businesses with a lot of growth potential, but tend to be a little bit smaller than the flagship. Collectively, that set of businesses for us are advantaged. They tend to be our higher margins, so they drive favorable mix for us, and they have big consumer spaces we're pushing them into for growth.

So an example of that would be take 2 of our flagship brands, Planters and Hormel Pepperoni. Both of those brands have great potential to expand beyond the remit of their immediate categories and really push into what I call the consumer space of substantial snacking. So if you look at the behavior around snacking right now, there is pressure on snacking, but it's largely coming from consumers having less sugar, less carbs, wanting to cut back some of what I would call mindless munching. But what consumers are gravitating more toward and still looking for are satiating snacks with substance and nourishment, protein, fuel, right? They want to eat more frequently during the day, smaller meals, mini meals. And so our fuel-oriented portfolio with things like Pepperoni, Planters, Nuts fit incredibly well into that substantial snacking space. So pushing our flagship brands into these big consumer spaces is an immense opportunity. Another example of that would be our Jennie-O ground turkey business that I mentioned earlier.

Consumers are seeking lean sources of protein. And so ground turkey and poultry fits that incredibly well. And not only is ground turkey lean protein, which consumers are looking for, it's very versatile. And versatility is another version of value. If I can put it in the refrigerator and use it in 3 different meals in 3 different ways, I've now created value in my kitchen, value for my family, value for me. So that would be another example of how we're taking our flagship brands and positioning them into these bigger spaces, that one around lean protein. And then I'll give one more example, which is if you kind of click down into our rising brands, we have some incredible growth opportunities there with brands like Applegate. Applegate is one where we continue to push into the higher end of our categories with natural organic, high animal welfare meat. But what we're delivering every day to consumers who agree and align with that mission is we're delivering them convenience, value, versatility of the kitchen, simplicity, simple ingredient statements.

And so they're willing to pay for that bundle and our Applegate business continues to post significant growth quarter after quarter as a result of that connection. Our Mexican brands is just one more I'll mention, which is consumers continue to migrate to flavor experience. And so we have some wonderful Mexican brands in our portfolio with Herdez and Wholly Guacamole. And so our ability to take those brands and connect them to authentic food experiences, we've recently taken Herdez and brought it over into our protein-based entrees portfolio. So consumers looking for flavor adventure now can get an authentic Mexican flavor experience in a new category, and that has proven to be valuable as well. So from a retail perspective, we have so much opportunity with our brands to reorient them into these growth spaces. And then when you go to foodservice, operators are looking for help, too, right? Because the foodservice industry with traffic soft, inflation up, consumers not willing to pay the price points that are on the menu, operators are looking for a way to take costs out and simplify.

And so we're getting in the kitchen and helping them figure out ways to reduce labor, to take cost out of the system and to keep things affordable. And so that has been incredibly valuable for us to continue to drive top line growth in our foodservice business in a soft industry. So if I look out, I feel really good about our breadth. I feel really good about our connection to operators on the foodservice side, consumers on the retail side and our ability to solve problems for them with our brands and innovation will ultimately be our pathway to growth.

Okay. Let me pick up on one of those, and we have it on display here, obviously, Planters. It was very successful when you -- after you kind of like got into the innovation. And then obviously, you had the planned outage a little over a year ago that kind of like disrupted or put a break pause on the growth opportunity. So as you gain back that shelf space, as you gain back that share, where do you stand right now? Where were you as of the third quarter? And what's still the runway left? Where do you need to get to in order to like gain back all these point of sales that might be still missing?

Yes, great question. And obviously, Planters is a really important brand for us in a very incremental attractive category. To start with sort of the short-term answer to your question, which is we've been driving sequential improvement period-over-period for the past 9 months, right, recovering our distribution in the marketplace, recovering our consumption. We've now turned to growth. So in the latest 4 weeks of Circana data, which now bleeds into our fiscal Q4 into early August, we actually were up in dollar sales versus prior year on Planters 4%, up on distribution 7% versus prior year. So the brand is back to growth. We are back on offense with the brand.

It is a wonderful brand. And so what we're doing essentially to continue to attract consumers to it now is what we call our 3-part plan. So the brand is very responsive to communication. So we have been advertising the brand, supporting the equity and attracting people back that way. Number two is in-store execution and snacking, having those impulse purchases, strong in-store promotional plans, super important. That's the second part. And the third part, maybe the one I'm most excited about is we are back to innovating on the brand and supporting our innovation on the brand. And in snacking, so much of the vibrancy of a brand and a category comes to the news and the innovation.

And so if you look at some of the platforms we put out on Planters, flavored cashews, our flavored nut duos, where we're doing 2 different nut types with flavor combinations, extremely fun, exciting. But what's more exciting is they're actually attracting new consumers to the brand, younger consumers to the brand and to the category. So we're reinvigorating not just the Planters brand, but the snack nuts category. So our retail partners are very happy. We're back on offense with Planters. We're back in a position to drive brand growth, category growth and really support the brand in an aggressive way.

Okay. Got it. Just on Transform and Modernize. Obviously, things have been progressing fairly well. So where do we stand right now? What are like the final steps to kind of like conclude and maybe give us just a little bit of an update what you may have seen in the interim of incremental or additional opportunities within Transform and Modernize versus what was the initial target, I think, 2.5 years ago or something like that?

Yes, certainly. So I'll start off from the standpoint of while we have put a stake in the ground and put time frame, right? We have a time stamp of this 3-year transform and modernize initiative. That really was around us setting a target for ourselves and holding ourselves accountable to something, to some metric. That being said, you've heard us talk before about the fact that the benefits of Transform and Modernize go well beyond the 3 years and well beyond 2026. The target for 2025 is a range of $100 million to $150 million, and we will be at the high end of that. So we talked about on the third quarter call that for the third quarter alone, we executed 90 projects and captured value, which really generated what we expected for the quarter.

So overall, the initiative is on track and delivering for us, beyond savings, right? Really, it's around building capabilities for the company in terms of us investing in our talent, building out our infrastructure and overall generating growth for the business for the long term in all the different areas we talked about, right, going back to our focus areas is around how do we procure, how do we buy, right, more effectively in terms of our -- managing our cost base and how we procure, how do we make our products in a more efficient manner through our plants, through the supply chain and how do we move or how do we plan? So it's really an end-to-end value capture for us, and that's really still going well, and we expect that to continue here. And when you talk about what areas have we not yet perhaps unlock the value that we're looking for, I would say when we think about the main pillar, which is how do we get the right yield and have more efficiency through our plants, that's still an area where we are at the beginning stages.

We have this Hormel production system that we have talked about that really allows us to standardize how we work gets done in our plants and ensuring that as we go from plant to plant, we start up the plants exactly the same way and everyone is doing the work in the same manner to drive yield and optimize. And what that has allowed us to do is focus that in plants where we need to get more capacity, and we have been able to repatriate some of our manufacturing from outside where it's more costly, bring that back in-house to then manage our costs, and we'll continue to do that across the supply chain.

And so that's to come in terms of the full value from a manufacturing standpoint and then how do we optimize our footprint. We've talked about the fact that we have built and acquired many different businesses over time. And certainly, we are not optimal in terms of our manufacturing footprint. So that's also to come. So all in all, right, value still to be captured. We've captured a lot. We'll continue to do that beyond 2026. But we're really, really happy about where we are on the value that the Transform and Modernize is driving for us now and into the long term.

And then just to clarify what Jeff mentioned about the SG&A expense that would be on top of Transform and Modernize like the years beyond as you look to optimize that as well?

I mean, yes, we're looking at it as a separate initiative. And it's also a little bit more time focused. I mean there's a complexity to modernizing your company that requires that some of the projects there go months or even a year or 2, whereas in this case, we think what's fair to our team, what's fair to the marketplace is to get on it right now and really study it hard in the next 90 days and be clear by the time of our Q4 conference call that this is what we've decided to do.

Yes. And I just want to just double-click and just remind folks, I mean, we talk about Transform and Modernize, and I know the people's head go a lot to, oh, you, right? It's all about cost savings, but it really isn't. And I can't say that enough because we spent a ton of money just investing in the underlying infrastructure of our business, investing in our people, and it also allows us to invest in our brands when we think about what it opens up for us to be able to innovate and just drive value into our brand and our portfolio.

Okay. Got it. Brings me now to capital allocation and investments. I mean, obviously, I think you're looking for the higher end of the initial CapEx guidance. But clearly, you have the dividends, and we know they're very much focused. Along the lines of like CapEx after dividend -- CapEx and dividends, like buybacks as an opportunity or maybe M&A, where do you see the best opportunities from a capital allocation point of view because you've done M&A in the past. So where should we think about any extra cash to potentially go?

So I think, first, to think about us from the standpoint of being very disciplined, and I'm very proud that we are disciplined around our capital allocation strategy. And it continues to be the waterfall model that we look at to say, what's required, right? Our #1 on our list is our increased dividend, which we're very proud of. We have just paid our 388th consecutive quarterly dividend, which continues to put us in the Aristocrat arena. And so that continues to be a focus for us in addition to ensuring that we maintain our plan. So whatever CapEx we need to deploy to do that, that's in that first bucket. And then the next bucket is strategic.

So it's all around M&A and acquisition. And so that's an area we continue to look at as we think about what's best fit for our portfolio in terms of our strategic intention. A couple of the areas we have talked about as part of our 6 strategic objectives. One is around being a leader in food service. So to the extent there's something in that space and it's compelling enough, that would be of interest. The other area is around our snacking and entertaining portfolio and expanding that as much as we can. So that's another area as well and snacking in the way that John has described it, not the mindless snacking, but snacking that really fits in our protein-centric portfolio as we're focused.

And then the other area is really continuing to expand our global footprint. So I'd say those are the areas that I would see that would be of compelling interest to us to the extent that the price is right because that has to also make sense for us. And the other area you mentioned, share buyback is not necessarily a lever that we have given our 46% ownership of the Hormel Foundation. So it's really hard to really drive value for our shareholders with share buyback and which is why we're really focused on ensuring that we increase and pay our dividend.

Okay. Final question, last couple of minutes, just like more of like a long-term outlook. I mean, obviously, you talked about M&A and international focus. So if we bring this all together, maybe with '26 being maybe not right -- a good example from a growth perspective, medium term, like the growth algorithm you've targeted, Jeff, you mentioned it earlier on. So what do you need to execute on over the next couple of months to really get the ship going into the right direction to deliver on that growth algorithm, low single digit, mid-single digits? Top bottom line growth as we think forward?

I mean I see a lot of positive factors heading into '26, again, with a caveat that this is an early read and it is not formal guidance at this point. We have sales momentum. I talked about all 3 units growing sales. We have pricing that is already in place that has already been communicated to the customer and that we will be rolling through. It's not all of it, as John mentioned, we did have to take a second look, and we're making some assessments there. As we head into the new year, the business units are able to assess their plan in terms of marketing and promotion and work on promoting brands that deliver stronger bottom line to enhance our mix opportunity.

Jacinth mentioned the continued momentum of T&M, and so we expect to see more benefits in that area. We've talked about manufacturing changes. And we've announced some this year, but they take some time to filter through. So for example, we announced the closure of the Columbus, San Francisco plant back in the second quarter. We're just finishing moving some of those lines into the new locations now. So the benefit of that and the Atlanta plant -- partial plant closure with the bacon line, those will show up during 2026. Then there's the SG&A initiative that we're focused on that we expect to have ready. It may not all hit the moment first quarter starts, but we definitely expect as we head into calendar '26 that those should be benefits as well.

So I guess to us, I mean, this is an investor conference, we recognize that HRL, the company stock is on sale right now. We've driven top line. We think we can continue to drive top line, and we think we have a lot of reasons in place why the bottom line should start to follow.

I would say that's a wrap. Well, Jeff, Jacinth, John, thank you very much, and good luck with the rest of the meetings. And thank you very much. There won't be a breakout session, but you all have the opportunity to meet them in group meetings or one-on-one meetings. Thank you very much.

Thank you...

Thank you.