Erica Eiler

Erica Eiler asked for insights into Hormel's gross margins, including high-level puts and takes for the year and the expected cadence of recovery, and also inquired about the health of inventory levels and the drivers behind the 11% increase.

Answer

Interim CFO Paul Kuehneman attributed 2025 gross margin pressures to commodity inflation (500bps in Q4), the chicken recall, Little Rock fire, and Planters mix dynamics. For 2026, he expects gross margin expansion from mix improvements, pricing flow-through, and T&M savings. He expressed comfort with inventory levels, noting a Q4 decrease, with increases driven by commodity markets, strategic decisions for colder months, and Planters replenishment.

Speaking for Rupesh Parikh, Erica Eiler of Oppenheimer & Co. Inc. asked if Hormel is still viewed as a double-digit operating margin business over time. She also questioned if the recent top-line performance marks a sustainable inflection point for growth.

Answer

Interim CEO Jeffrey Ettinger deferred on a specific margin target but highlighted positive drivers like sales momentum, mix enhancement, pricing benefits, and cost controls. President John Ghingo affirmed confidence in sustainable top-line growth, driven by the advantaged foodservice model and strong performance of flagship brands in retail.

Erica Eiler, on behalf of Rupesh Parikh of Oppenheimer, asked for a detailed breakdown of the fiscal 2025 gross margin outlook, including the impact of productivity savings, price investments, and mix shifts from digital and pharmacy. She also inquired about the competitive and promotional landscape.

Answer

President and CFO Sharon McCollam explained that productivity savings will benefit both SG&A and gross margin, with more impact on SG&A in 2025. She confirmed that strong growth in lower-margin pharmacy and digital businesses will create mix headwinds, though this is improving with scale. CEO-elect Susan Morris added that the promotional environment remains active as customers seek value, and while competition from mass and club is present, Albertsons' customer traffic is up.

Erica Eiler, on for Rupesh Parikh, asked about management's confidence in sustaining the positive momentum at Family Dollar, specifically regarding its traffic growth and the recent positive turn in discretionary sales.

Answer

Interim CEO Mike Creedon expressed high confidence, attributing the success to durable merchandising changes, such as focusing on high-frequency discretionary items and targeted store resets. He emphasized that the strong performance of renovated H2.5 and urban extra small box (XSB) formats provides a long-lasting foundation for continued momentum.

On behalf of Rupesh Parikh, Erica Eiler asked about further opportunities to capitalize on the natural and organic trend, beyond current Boulder Canyon initiatives, including potential M&A. She also inquired about any notable shifts in channel performance, particularly in value-focused channels like hard discount and dollar stores.

Answer

CEO Howard Friedman highlighted that the near-term plan for Boulder Canyon is to continue driving distribution gains, innovation, and investing in brand equity. Regarding channels, he noted that consumers are seeking value across the entire spectrum, from premium products to promotions in various classes of trade, and the company's results reflect a positive response to its multi-faceted value offerings.