AUSTIN, Minnesota (AP) — Hormel Foods Corp. said Tuesday that fourth-quarter net income rose 17 percent on better prices for turkey and lower grain costs.
The company cited strong sales for its Jennie-O Turkey Store and refrigerated foods divisions.
Chief Executive Officer Jeffrey Ettinger said Hormel will be hiking prices by 3 percent to 4 percent on a range of products in 2011, from Spam to prepared turkey. He said higher grain prices are forcing the move, along with higher costs for raw materials like aluminum cans. Some price hikes are already under way, and Hormel will judge future hikes on the market reaction, Ettinger said in an interview.
“We’re going to be very strategic,” Ettinger said. “We have to focus the pricing activity. It’s kind of an assessment of how consumers are reacting to the (product) categories and what the competition is doing.”
The maker of Spam, Dinty Moore canned beef stew and other prepared foods said its net income for the quarter was $121.1 million, or 90 cents a share, compared with $103.9 million, or 77 cents a share, during the same period last year.
The performance easily topped Wall Street expectations and Hormel said it was boosting its annual dividend by 21 percent, or 18 cents, to $1.02 per share. The company’s shares rose $1.33, or nearly 3 percent, to $49.26 during morning trading.
Refrigerated foods accounted for 53 percent of net revenue during the fourth quarter, the company said. Sales were up 26 percent in that division as consumers bought more party trays and deli meats. The Jennie-O Turkey division was boosted by higher turkey prices, and sales rose 19 percent.
Ettinger said consumers are starting to spend more on its higher-end prepared products with the economy gradually improving. While bargain hunting is still the norm, he said shoppers are showing a new willingness to spend a little more on things like party trays and prepared products.
“Maybe they’re being a little less cost-oriented, but there is an overriding feeling of not adding a lot of debt,” he said.
Revenue for the quarter was $2.063 billion, compared to $1.675 billion last year.
The company said higher grain costs will be a risk in fiscal year 2011, and said it expects to earn between $3.10 and $3.20 per share.
For the full fiscal year 2010, Hormel said net income was $395.59 million, or $2.92 a share, compared to $342.81 million, or $2.53, the year before.
Revenue for the year was $7.22 billion, compared to $6.534 billion during the same period last year.
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