Hormel says the value of products like Spam and Skippy peanut butter rose alongside unemployment rate
Hormel Foods Inc. says that as the unemployment rate has risen, so has demand for items that fall into its grocery products category, which includes Spam canned meat, Skippy peanut butter and Hormel brand canned chili.
Hormel HRL, +1.80% reported an 8% jump in net sales of items in this category to $ 683.3 million in the fiscal second quarter. Profit in this segment soared 22%.
“We know our center store brands are perfectly suited for value consumers who need affordable, high-quality products for their families,” said James Snee, chief executive of Hormel Foods, on the earnings call, according to a FactSet transcript.
Center store refers to items typically found in the middle aisles of the grocer including canned goods.
“With millions of Americans now unemployed, our shelf-stable products are as important to consumers as they’ve ever been.”
Read:With over 35 million people filing for unemployment since March, $ 1,200 stimulus checks are just a Band-Aid for Americans
More than 2.4 million Americans filed for unemployment last week, bringing the total since mid-March when the coronavirus pandemic and lockdowns began to 35.5 million.
Grocers like Walmart Inc. WMT, -0.21% , Target Corp. TGT, -0.20% and BJ’s Wholesale Club Holdings Inc. BJ, +5.64% all reported a spike in traffic and sales as shoppers loaded up on items to fill their pantries.
But Hormel doesn’t think these items are going into pantries and sticking around for very long.
“[W]hen you think about Skippy, when you think about Spam, when you think about Hormel chili, those items seem to be really clearing, not only the retailer, but obviously the households as well,” Snee said.
Snee said the company has also seen a jump in new buyers who are going back and buying Hormel products again.
Hormel reported overall sales for the quarter of $ 2.42 billion, beating the FactSet consensus, but profit of 42 cents per share missed the outlook.
See: Americans use their $ 1,200 stimulus checks to splurge at Walmart, Target, BJ’s and Best Buy — here’s what they’re buying
Like other companies, Hormel incurred costs associated with COVID-19 including $ 20 million for supply chain, employee bonuses and safety measures. Hormel says it expects another $ 60 million to $ 80 million in costs for the second half of the year, primarily in the third quarter.
Hormel also saw its foodservice business take a 21% sales hit as restaurants shut down, impacting the refrigerated foods and Jennie-O Turkey Store segments. Foodservice represented about 40% of sales before the coronavirus pandemic, Snee said. Colleges, universities and lodging are also part of that business.
Without restaurants to go to, Hormel says the Sadler’s Smokehouse brand and Lloyd’s barbecued meats have been stepping in.
“One unique trend we are seeing in the marketplace is consumers searching for products that can replace a restaurant experience,” Snee said. “Our retail lines at Sadler’s and Lloyd’s have been operating at capacity to meet the demand for their products.”
The acquisition of Sadler’s Smokehouse was completed in March.
Hormel stock rose 2.1% in Friday trading, and has rallied 19% over the past year. The S&P 500 index SPX, -0.27% is up 3% for the last 12 months.