Q1 2025 Hormel Foods Corp Earnings Call
[music].
Good morning, ladies and gentlemen, and welcome to the Hormel Foods Corporation first quarter earnings Conference call.
Speaker Change: At this time all lines are in listen only mode. Following the presentation. We will conduct a question and answer session. If at any time. During this call you required immediate assistance. Please press star zero for the operator. This call is being recorded on Thursday February 27, 2025, I would now like to turn the conference over to Jeff Bloomberg Director of Investor Relations.
<unk>. Please go ahead.
Speaker Change: Good morning, welcome to the Hormel Foods conference call for the first quarter of fiscal 2025.
Speaker Change: 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 Hormel foods dot com under the Investor section along with our supplemental slide materials.
Jim Snee: On our call today is Jim Snee, President and Chief Executive Officer, just sent Smiley Executive Vice President and Chief Financial Officer, and John Gingell Executive Vice President of the retail segment.
Jim Snee: Jim and just sent will review the company's fiscal 2025 first quarter results and provide a perspective on the remainder of the year.
Jim Snee: Then John will join Jim and just scent for the Q&A portion of the call.
Speaker Change: Your line will be opened for questions. Following the prepared remarks as a courtesy to the other analysts please limit yourself to one question with one follow up.
Jim Snee: If you have additional questions you are welcome to get back into the queue.
Jim Snee: At the conclusion of this morning's call a webcast replay will be posted to our investors website and archived for one year.
Jim Snee: Before we get started this morning, I'd like to reference our Safe Harbor statement.
Jim Snee: 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.
Jim Snee: Please refer to our most recent annual report on Form 10-K, and quarterly reports on Form 10-Q, which can be accessed at Hormel foods dot com under the investors section.
Jim Snee: Additionally, please note we will be discussing certain non-GAAP financial measures. This morning.
Jim Snee: Management believes that doing so provides investors with a better understanding of the company's underlying operating performance.
Jim Snee: 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.
Jim Snee: Further information about our non-GAAP financial measures, including our comparability items and reconciliations are detailed in our press release, which can be accessed from our corporate or investor website.
Jim Snee: I will now turn the call over to Jim Snee.
Jim Snee: Thank you Jess good morning, everyone.
We achieved solid top line results in the first quarter and made great progress against our key priorities.
Jim Snee: We are on track to drive growth in the back half of the year and deliver on our 2025 expectations.
Jim Snee: Our value added portfolio is strong and performing well evidenced by our top line performance and our leadership positions in the marketplace.
Jim Snee: We grew organic net sales, 1% in the first quarter, which is encouraging given the dynamic consumer environment.
Jim Snee: Demand for key brands, including spam Applegate, Jennie O Hormel Black label, Hormel fire Braised meats and cafe H globally inspired proteins was strong.
Jim Snee: Our value added portfolio continues to be highly relevant to customers consumers and operators.
Jim Snee: Our teams executed well in the first quarter to deliver these results.
Jim Snee: And I'd like to highlight a few of the initiatives that contributed to our organic top line growth.
Jim Snee: And retail focusing our resources on our flagship and rising brands has proven to be highly effective.
Jim Snee: We grew overall volume and net sales for these brands led by spam Applegate natural and organic meats, Hormel Black label, Bacon, and Jennie O lean ground Turkey.
Jim Snee: One of our most iconic brands span has increased households, and attracted younger consumers due to our focused investments.
Jim Snee: In the first quarter. This included the successful <unk> marketing campaign.
Jim Snee: On trend flavors like Korean barbecue and new avenues of product usage, such as the launch of spam moves to be.
Jim Snee: National retail chain Associate Department.
Jim Snee: Our investment and focus behind this brand is spotlighting its versatility and potential for continued growth.
Jim Snee: The success of the Applegate brand in the quarter reflects our continued focus on leaning into our loyal consumers values and needs.
Jim Snee: We understand that the applegate consumer expects high quality, great tasting products with simple ingredients statements.
Jim Snee: This is just one reason the brand is leading the way in their respective categories in the natural channel.
Jim Snee: We are also using innovation to generate additional growth.
Jim Snee: Most recently, we launched two new applegate frozen convenient breakfast platforms.
Jim Snee: Breakfast sandwiches, and pancake and sausage sticks.
Jim Snee: This innovative and consumer focused approach has fueled growth for the applegate brand driving volume and dollar growth across categories.
Jim Snee: Another flagship brand Hormel Black label Bacon continue to showcase the power of protein meeting indulgence.
Jim Snee: After a remarkable fiscal 2024 for Hormel Black label, we are proving that the momentum we are building for the brand is lasting.
Jim Snee: The team continues to lean into powerful marketing and innovation.
Jim Snee: Our latest innovation Hormel Black label oven ready delivers an easy convenient mess free way to Cook vegan.
Jim Snee: Despite a challenging macro environment I am encouraged by the volume led growth from our flagship and rising brands in the first quarter and we expect our focused efforts to continue delivering results.
Jim Snee: A key driver of retail as momentum as the recovery of our planters business our largest flagship brand.
Jim Snee: The first quarter met our expectations with significant sequential recovery in the marketplace.
Jim Snee: The team has been taking the right actions to return the brand to topline growth with improved fill rates distribution gains.
Jim Snee: And accelerated innovation.
Jim Snee: During the holiday season, our team introduced five limited time flavors to generate excitement.
Jim Snee: And these flavor has brought a younger and incremental consumer to the snack nuts category.
Jim Snee: The <unk> brand also played a starring role in our here for the snacks campaign.
Jim Snee: Seasonality for many of our retail brands peaks around the big game.
Jim Snee: Benefiting from the alignment that our go forward structure has created we were organized to implement a scaled multi brand event.
Jim Snee: Integrating planters Hormel pepperoni, hormel gatherings aired as fully and Hormel chili into a single campaign.
Jim Snee: This initiative represents a significant shift in how we show up in the retail space.
Jim Snee: We transitioned from interface you all brand investments to a comprehensive multi brand media plan, while capitalizing on a strategic partnership with ESPN.
Jim Snee: The scale of our relevant portfolio changed our interactions with customer partners.
Jim Snee: For example, we doubled our in store display counts compared to last year and received numerous accolades from our trusted retailers.
Jim Snee: Looking ahead for the retail segment I am confident in our team's ability to build on the momentum we experienced in the first quarter with our flagship and rising brands.
Jim Snee: The breadth of our portfolio will continue to allow us to navigate the consumer environment.
Jim Snee: Expect to see innovative solutions addressing convenience and flavor needs launching in the coming months, along with continued advertising support for our key brands to drive profitable top line growth.
Speaker Change: Shifting now to our foodservice segment I would be remiss, if I didn't start by acknowledging the upcoming retirement of Mark Corrado.
Jim Snee: Group Vice President of Foodservice.
Jim Snee: After an incredible 37 year career with Hormel foods.
Jim Snee: Mark has been pivotal in the successful development and evolution of our three 8 billion dollar foodservice segment.
Jim Snee: And I know many of you have enjoyed meeting with mark over the years.
Jim Snee: His passion for great food care for the team and his accountability to our customers and company will be greatly missed.
Jim Snee: We also announced David Weber, a 33 year of Hormel Foods team member and current Vice President of Foodservice sales will succeed Mark.
Jim Snee: The foodservice segment.
Jim Snee: I look forward to many of you meeting David out on the road later this year and I am confident you will be energized by his passion for the industry and for our company.
Jim Snee: The foodservice segment's results have been driven by strong performance across the premium prepared proteins, Turkey premium Bacon and breakfast sausage categories prop.
Jim Snee: Products, such as branded Jennie O, Turkey items, Hormel fire braised meats and cafe H globally inspired proteins delivered strong volume and net sales growth in the quarter.
Jim Snee: Impressively premium prepared proteins achieved a fifth consecutive quarter of double digit net sales growth.
Jim Snee: Looking ahead for foodservice, we expect the team to continue driving growth through our solutions based portfolio.
Jim Snee: Knowledge and expertise of our direct selling organization and our diverse channel and market presence.
Jim Snee: Turning now to our international segment.
Jim Snee: First quarter was marked by several highlights demonstrating how we continue to develop our global presence.
Jim Snee: Two of our biggest global brands spam and Skippy excelled in the first quarter through branded exports.
Jim Snee: In China the team advanced our snacking strategy with the introduction of barbecue bites further solidify our presence in the meat snacking category.
Jim Snee: The barbecue bites deliver an everyday offering with on trend flavors and are a welcome alternative to car base snacks.
Jim Snee: We also continued to benefit from our partnership with Garuda food in the quarter.
Jim Snee: Driving our staffing efforts into new channels with plans for further expansion into new markets in the future.
Jim Snee: After a strong recovery by our international segment last year, we continue to expect another year of growth in fiscal 2025.
Jim Snee: We also made solid progress on our transformation initiative in the first quarter.
Jim Snee: Our commitment remains to transform and modernize our processes our portfolio and the way we create value in order to return the company to its historical earnings trajectory.
Jim Snee: Let me remind you that this is not a cost savings initiative, but a program designed to generate growth through investments in our people processes data and technology and our brands and in return we will generate a continuous growth flywheel.
Jim Snee: That will allow us topline momentum and bottom line returns.
Jim Snee: Yeah.
Jim Snee: We continue to optimize our portfolio in the quarter divesting a noncore South farm operation.
Jim Snee: This was our last connection to vertically integrated pork.
Jim Snee: Further demonstrating our commitment to reducing commodity exposure and simplify our portfolio.
Jim Snee: As we shared in our last call, we expect fiscal 2025 to be a milestone year in our 10 am initiatives as we expect to deliver $100 million to $115 million in additional benefits. We are off to a great start in 2025.
Jim Snee: And remain focused on achieving our three year goal.
Before I turn it over to just sense for further details on our results I want to take a moment to reference my recent retirement announcement as you saw in the news release, a search is underway for the next leader of our company.
Jim Snee: I want to emphasize my personal commitment and confidence in our ability to achieve our fiscal 2025 goals.
We have started the year on track and it is my firm belief that we have the right strategy in place the right focus resources and the best brands products and team members to continue to drive long term sustainable earnings growth.
Speaker Change: With that I will turn the call over to <unk> to discuss our financial commentary related to the first quarter and details on our outlook.
Speaker Change: Thank you Jim.
Speaker Change: And good morning, everyone.
Speaker Change: As Jimmy noted.
We achieved solid top line results in the first quarter and made great progress on our strategic priorities.
Speaker Change: Net sales for the quarter were $3 billion.
Speaker Change: 1% organic increase over last year.
Speaker Change: Foodservice led our topline growth, primarily driven by strong performance across many of our premium category.
Speaker Change: The retail segment benefited from growth in our value added portfolio and the international segments saw growth from their China business and exports.
Speaker Change: Our gross profit margin was 15, 9%.
Speaker Change: Value added growth was more than offset by year over year margin pressures related to the plant is recovery.
Speaker Change: Commodity input costs, namely pork beef and nuts.
And the supply chain impacts of bird illnesses.
Speaker Change: For the first quarter adjusted SG&A expenses increased 2.5%.
Speaker Change: Mainly due to employee related expenses.
Speaker Change: We continue to invest in our leading brands.
Speaker Change: We spent $43 million in advertising expenses during the first quarter and as Jim noted.
Speaker Change: We plan to increase brand support to drive growth for fiscal 2025.
Speaker Change: Interest and investment income for the first quarter decreased primarily due to lower performance from the Rabbi Trust.
Speaker Change: The effective tax rate was 21, 8%, which is favorable compared to the prior year due to the purchase of federal transferable energy credit.
Speaker Change: We reported diluted earnings per share of 31 for.
Speaker Change: For the first quarter of fiscal 2025.
Speaker Change: And adjusted diluted earnings per share of 35.
Speaker Change: Turning now to cash flow.
Speaker Change: Operating cash flow was $309 million for the first quarter.
Speaker Change: We invested $72 million and capital expenditures.
Speaker Change: And our largest spend was for value added capacity unlock.
Speaker Change: We continue to estimate capital expenditures for fiscal 'twenty to 'twenty five to be $275 million to $300 million.
Speaker Change: With a focus on capacity.
Speaker Change: Infrastructure investments and new technology.
Speaker Change: We are committed to dividend growth and remain a proud dividend aristocrats.
Speaker Change: We paid our 386th consecutive quarterly dividend during the quarter at an annual rate of $1 16 per share a 3% increase over last year.
Speaker Change: We ended the first quarter with $2 9 billion in debt and remain at the low end of our stated net debt to EBITDA target.
Speaker Change: Our overall value added portfolio performed well in the marketplace and exceeded our expectations.
Speaker Change: The plant is recovery is on track.
Speaker Change: The brand delivered as expected in the quarter.
Speaker Change: As anticipated, we experienced negative impacts from lower year over year.
Speaker Change: Bird, Turkey markets and lower investment income.
Speaker Change: Additionally, we faced incremental headwinds as we navigated the supply chain impact of bird diseases.
Speaker Change: And the commodity to market input costs, which were significantly higher year over year and above our expectations.
Speaker Change: Taken together, our first quarter earnings were in line with our expectations.
Speaker Change: Looking ahead to the second quarter.
Speaker Change: For retail, we expect net sales to be comparable to the prior year.
Speaker Change: In foodservice, we expect mid single digit growth in organic net sales.
We expect strong top line performance for the international segment, resulting in high single digit growth.
Speaker Change: We expect growth in our value added portfolio and benefits from our <unk> initiative to be partially offset by lower investment income and higher investments in people data technology and brand support.
Speaker Change: Additionally, we are pleased with our significant market recovery in the plant to its business.
Speaker Change: However, we will have a difficult year over year comparison in the second quarter, given the strong brand performance in the prior year.
Speaker Change: We are also monitoring pressures and the Turkey supply chain as we navigate bird diseases impacting poultry and we will take appropriate actions to preserve profitability.
Speaker Change: Overall for the second quarter, we expect our bottom line to be comparable to the first quarter.
Speaker Change: Ended below prior year.
Speaker Change: Shifting now to our second half guidance, we expect to significantly benefit from the recovery of our punches brand.
Value added Turkey is it seemed to be a tailwind in the second half and we are confident in our supply position.
Speaker Change: We anticipate broad based growth in the foodservice segment and continued growth in China and the international segments.
Speaker Change: Continued investments in our brand and the transform and modernize initiatives will drive value.
Speaker Change: For the full year, we are reaffirming our organic net sales growth outlook of 1% to 3% and adjusted diluted net earnings per share expectation of $1 58 to $1 72.
Speaker Change: We remain confident in our outlook for bottom line growth from.
Speaker Change: From each segment in the second half of the year and remain committed to delivering long term value through strategic execution, including continued success from our transform and modernize initiative.
Speaker Change: To conclude our remarks, we are pleased with our strong topline results this quarter, reflecting the strength in our value added portfolio and leadership position in the marketplace.
Speaker Change: As we look ahead, we are confident in our execution of our strategic priorities, including our transform and modernize initiatives.
Speaker Change: Our solid financial foundation and strategic focus.
Speaker Change: <unk> us well to achieve our targets and continue delivering sustainable growth.
Speaker Change: At this time I will turn the call over to the operator for the question and answer portion of this call.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on you touched on a phone you will hear prompt that Youre Handoffs memories should you wish to decline from the polling process. Please press star followed by the <unk>.
Speaker Change: If you are using speaker phone please lift the handset before pressing any keys one moment. Please for your first question.
Speaker Change: Your first question comes from Peter Galbo with Bank of America. Your line is now open.
Peter Galbo: Hey, good morning, guys. Thanks for the questions.
Speaker Change: Jim just wanted to unpack the EPS cadence a bit more.
Peter Galbo:
Peter Galbo: Obviously, the first quarter I think you said was in line, but maybe came in a couple of pennies below.
Peter Galbo: We had been talking about last quarter. I think you were looking for $4 to $5 10 headwind from from planters in Turkey in the first quarter, maybe it seems like that came in a bit more.
Peter Galbo: And then the flattening out.
Peter Galbo: The <unk> at a similar rate to <unk>.
Speaker Change: Imply that youre, pushing I don't know five extensive EPS into the back half of the year and it's a pretty steep ramp as you get there. So just curious kind of what gives you confidence that.
Speaker Change: You can't actually effectively ramp the EPS to the level it needs to be in the back half of the year and some of the building blocks to help us get there.
Peter Galbo: Sure Good morning, Peter Thanks for thanks for the question.
Peter Galbo: Yes, as we deconstruct really what we've been saying over the last year I think it's important for us to have that conversation again and really demonstrate why we're well positioned for a strong second half and probably the best way to think about it.
Peter Galbo: So what hasn't changed from what we've been talking about and then what has changed.
Peter Galbo: And so what Hasnt changed is the fact that our value added business and retail continues to perform well.
Peter Galbo: <unk> recovery the planters performance is on is on track.
Peter Galbo: Again, just as a reminder, we will have a strong second half with favorable year over year comps.
Peter Galbo: Broad based growth in foodservice and again, we expect favorable year over year comps in the second half after a strong recovery in 'twenty four steady strong growth in international right. Those are the things that haven't changed and have remained consistent.
Peter Galbo: The part that has changed from what we talked about in Q4 as the fact that we've experienced some pressures and especially in the near term on our Turkey supply chain.
Peter Galbo: And so as we're thinking about that for the balance of the year.
Peter Galbo: <unk> had to take some strategic pricing actions that are in place.
Peter Galbo: And although we won't recognize the benefit of that in Q2. So we'll have the pressure, but not the benefit in Q2, which is why we've guided you so prescriptive Lee in that quarter.
Peter Galbo: But we will get the benefit in Q3, and Q4 and so when we when we think about the back half of the year.
Peter Galbo: It's a very achievable second half we understand that it's strong, but there's not a lot that's changed from what we told you and we've taken the right actions on the Turkey complex.
Peter Galbo: And Peter to provide just a little bit more color in terms of order of magnitude for the second half.
Jim Snee: Obviously as Jim mentioned, we expect plan just to be a big contributor to the bottom line growth and next is PNM that initiative continues to deliver strongly we're off to a strong start we expect the second half to be even stronger and the rest of the value added portfolio continues to grow so that.
Jim Snee: We will deliver growth in the second half as well so the bottom line is overall our value added business is strong as we have said and we expect growth from every segment of the business in the second half, which is what gives us our confidence in our guide.
Speaker Change: Got it thanks, thanks for all of that.
Jim Snee: Clear.
Peter Galbo: Jim I, just was hoping maybe you could elaborate a bit more.
Speaker Change: On the CEO search process the succession planning.
Speaker Change: I think historically hormel.
Speaker Change: A lot of it is kind of growing people internally and promoting from within is I think been the history, but just curious if theres any.
Speaker Change: Different in their thinking this time around with the board on being more aggressive in an external search thanks very much.
Speaker Change: Yes, thanks for the question Peter.
Speaker Change: I think it's important.
Speaker Change: You hear all the time right. The most important responsibility of the board is to make sure. They select the right CEO for the job and as I think about my time and tenure in the role.
Speaker Change: I've had the chance to really build the next wave of company leaders.
Speaker Change: Think about everything that we've got done and that we've had to navigate.
Speaker Change: Impressive and I'm really proud of the work that we've done and then building. This next wave of company later and having many of them in place is what really sets that sets our company up for the future and I believe the next leader can help finish some of the work that we've started thinking about the <unk>.
Speaker Change: N M initiatives and also be formative in the years that follow and so the search committee is hard at work just like you said, giving good consideration to both internal and external candidates, which is absolutely. The right thing to do right you want to have that rigor and make sure that you've properly survey the landscape.
Speaker Change: And it's more important for them to get it right than it is for them to go fast and so.
Speaker Change: I am very confident that whether it's internal or external we're going to find the right person to lead the company into the future and then also until that transition takes place I'm not going anywhere I am focused on the business I'm engaged with the team right and we're driving to deliver our 2025 goals and even.
Speaker Change: Beyond that as needed I'm available and will be a strategic advisor to the to the organization. So we're in a really good place with everything that we've done and have yet to come.
Speaker Change: But really appreciate the question.
Great. Thanks very much.
Speaker Change: Yes.
Speaker Change: Your next question comes from Ken Goldman with Jpmorgan. Your line is now open.
Ken Goldman: Hi, Thank you.
Ken Goldman: On the pressures in the near term on the Turkey supply chain that you referenced.
Ken Goldman: Could you maybe elaborate a little bit on what those pressures or what exactly.
Ken Goldman: Youre feeling and.
Ken Goldman: Given that whole bird, Turkey prices as far as we can tell.
Ken Goldman: Haven't really moved how comfortable are you in taking pricing and having your customers except this pricing willingly.
Ken Goldman: In light of the underlying commodity maybe not having moved so much if that's the right way to think about it.
Speaker Change: Yes, Ken Thanks, Thanks for that question.
Speaker Change: The way, we described it as strategic pricing actions across the entire Turkey complex and so we wanted to make sure that we make the distinction that this is a fundamentally different conversation than we had last year.
Speaker Change: Last year, we were talking about pure commodity markets commodity items like whole birds, and we are positioned very differently and so we are thinking about the complex, but a big part of that complex is the value added business that we have in Turkey, both in retail and <unk>.
Speaker Change: In foodservice and so when we think about really the two factors that are driving these actions bears some turkey illness, and the supply chain, that's providing some pressure and having supply chain impacts.
Speaker Change: Then the other side. It's just there are a number of underlying Turkey categories are commodities that are at all time highs and so when we think about those markets relative to the value added pricing. That's what we know how to do and that's how we know how to manage a business an obvious.
Speaker Change: John will have a big impact in terms of.
Speaker Change: The value added complex. So maybe John you want to add a little more color. Yes. Thank you and thanks, Ken for the question. So just to expand on that comment a little bit that this is.
Speaker Change: This year is different from a Turkey perspective last year, we were talking about commodity whole birds now we're talking about value added, Turkey, and a significant consumer opportunity with that value added Turkey complex and if you look at poultry.
Speaker Change: And in particular ground, Turkey is very aligned with consumer needs. So consumers continue to seek lean sources of protein poultry is a great choice as just one example of where we see the appeal of poultry is among the <unk> community. So it's very early days on <unk> still a lot to learn.
Speaker Change: About the impacts of <unk>, one, but some of the early research. We're seeing shows that in addition of fresh fruit for weight management products poultry and fish are among the highest growth categories experiencing increased consumption for GL those on <unk>. So.
Speaker Change: And then you look at it from a lifestyle and usage perspective ground, Turkey is a very versatile option for consumers. It plugs in very well for everyday life different food experiences. So with the number one brand nationally and Jennie O and ground, Turkey, we're in a great position to capitalize on that growing consumer market and in fact, if you look at the first quarter of the year.
Speaker Change: Jennie O was up 6% in volume and that was that scanner data consumption data, but that's within a growing category. So demand has been very strong for some time and the trends underneath that rising demand. We believe our longer term in nature. So we really like that plot from a consumer perspective as well.
Speaker Change: Great. That's helpful. Thank you and as a follow up.
Speaker Change: And to build on Peter's question, Jim I think first of all congrats on your.
Speaker Change: Coming retirement.
Speaker Change: I would be curious just for a little more color.
Speaker Change: Some of the questions, we're getting from investors I'd like to pass on.
First of all.
Speaker Change: Was there any consideration to waiting on the announcement until a successor was found just given that I think some interpreted the move is a little more sudden.
Speaker Change: And unexpected to the board, maybe that's wrong I'd love to hear your thoughts on that.
Speaker Change: Then is now really the ideal time as the other question I guess, just given the transformation and modernization program.
Speaker Change: <unk>.
Speaker Change: Especially how much of that growth really needs to come next year.
Speaker Change: Have someone new in the seat is that the ideal.
Speaker Change: Situation for the company. So I know, there's never a perfect time, but I just wanted to get some of your added thoughts on that if I could.
Yeah, Thanks, Ken and first thanks for the congratulations I appreciate that.
Speaker Change: And absolutely the questions you're asking are the questions I've been getting for what six weeks now and I think theres a couple of things at play here.
Speaker Change: And I'll go back to what I said right. The most important job of the board is to make sure that they picked the right CEO.
Speaker Change: So the way we're going at a test time, which I think is very responsible in terms of surveying the internal and external landscape.
Speaker Change: If youre going to go and look at the external landscape, it's hard to tell.
Speaker Change: Tell somebody youre going to recruit them to be CEO, when theres, a CEO and a chair who hasn't announced her retirement.
Speaker Change: That in and of itself is a really important consideration in the process and so.
Speaker Change: Could you have waited I suppose but it would put more pressure on the process that I. Just don't think that's fair to the organization I think the way that we announced it and said Hey, Jim is going to be here through the end of the year, Jim is going to be a strategic advisor as needed and I think that's really important to the sector.
Speaker Change: Part of your question.
Speaker Change: These are big initiatives that are started under my watch with I mean, the entire team committed to these transform and modernize initiatives. So its not Jim Snee, who is executing against the transform and modernize initiative every single day, it's incredible team that we have that.
Speaker Change: It is bought in they see the need and they believe in the opportunity. So that work that work is underway and that work continues and as we've said it really turns into this powerful growth flywheel now.
Speaker Change: Over time, becoming even more powerful.
Ken Goldman: The last part I would say Ken and this is another thing that that deserve strong consideration.
Ken Goldman: If I wait until the end of transform and modernize and somebody and I say I'm done I'm retiring and now the next person has to come in and then say Oh, what's next.
Ken Goldman: It's not fair to that person. So I think this allows us to continue the execution of T. N M. That's already underway. It gives the next person appropriate time to really think about and and formalize or put together their plan for the future.
Ken Goldman: Right, rather than having to have that on them in day, one and so I think the timing actually makes a lot of sense, yes, it's maybe a little bit different than we've done in the past, but I also think we're a different organization than we've been in the past and some of the things that we've undertaken are different than we've taken under.
Ken Goldman: Taken in the past really set us up for the future. So.
Ken Goldman: Long winded answer, but hopefully as you start to put all of those puzzle pieces together you see how it really does make sense for the organization.
Ken Goldman: Thanks, so much.
Ken Goldman: Yes.
Speaker Change: Your next question comes from Heather Jones with Heather Jones Research. Your line is now open.
Heather Jones: Good morning. Thanks.
Speaker Change: Just had a question.
Heather Jones: I am good.
Heather Jones: Just follow up on.
Heather Jones: Hurricanes so.
Heather Jones: I estimate that you guys.
Heather Jones: I have lost something north of 5% of their supply in all but in the dark meat complex has moved.
Heather Jones: Considerably.
Heather Jones: But.
Heather Jones: The lighter needs pricing is starting to move and the tight and the pricing commentary on whole whole birds.
Heather Jones: Definitely gotten more constructive as shortages.
Heather Jones: Sorry to take effect in the marketplace.
Heather Jones: So just wondering.
Heather Jones: When you are.
Heather Jones: And your full year outlook.
Speaker Change: Are you assuming any benefit from the more positive commentary that we're hearing on whole bird pricing.
Speaker Change: Or are you only assuming a benefit from passing through higher pricing on the value added portion.
Speaker Change: Good morning, Heather Thanks for the question so our assumptions on whole birds have not change in our in our plan. So that's consistent.
Speaker Change: And so the change that we're referencing here relates to the rest of the Turkey complex and the pressure that we're seeing on the rest of that Turkey supply chain and when we talk about pricing action, it's specific to that and so that's what's changed in our assumptions as we look at what we.
Speaker Change: <unk> guided before and where we are coming off Q1, and when we think about the back the back half tailwind is really specific to the rest of the Turkey complex.
Speaker Change: Okay. Thank you for that.
Speaker Change: And then my follow up is when you take your guide and just back into a rough math on the EBIT side.
Speaker Change: Ticket to the 26 number imply.
Speaker Change: 23 analyst day.
Speaker Change: I mean to imply somewhere between 15 to almost 25% EBIT growth and 26.
Speaker Change: And.
Speaker Change: Just wondering if.
Speaker Change: One talk to you.
Speaker Change: Comfort level on that and to what would drive that kind of growth because I mean, that's a pretty substantial gross number.
Speaker Change: For any packaged food company.
Speaker Change: Curious to hear your thoughts on that thank you.
Speaker Change: Yes, Thanks, Heather and I think again consistent with the commentary and discussion that we had on our Q4 call, which was really our PNM update.
Speaker Change: As we laid out.
Speaker Change: We do believe that we're still on track to deliver that 2026 number.
Speaker Change: And as I just mentioned the can rate that's 10 a M work is creating this powerful growth flywheel, that's only going to accelerate as we continue to move along and so it is a combination of underlying growth in our business and I think we've kind of laid that out in terms of value added business retail foodservice inner.
Speaker Change: National reasons to believe there and then when you supplement that with the power of T N M and how thats going to to escalate over time.
Speaker Change: That's what gives us confidence that we're not going to get into the specifics. Obviously, we'll continue to give you updates as we progress, but it's those two things. So that has not changed from from our perspective in Q4 of last year.
Speaker Change: Okay. Thank you.
Speaker Change: Okay.
Your next question comes from <unk>.
Speaker Change: Perique with Oppenheimer. Your line is now open.
Speaker Change: Good morning, and thanks for taking my question and Jim also congrats on your retirement.
Speaker Change: So yes, thanks for your passion. Thanks, Thanks for your email.
Speaker Change: Maybe I guess to start out just a question just on margins. So obviously gross margins are down in Q1, just wanted to get a sense of how you guys would think about the interplay between gross margin and SG&A for Q2, and then for the balance of the year.
Speaker Change: Good morning repurchase.
Speaker Change: So when we think about our margins for Q.
Speaker Change: Q2.
Speaker Change: We are.
Speaker Change: We signaled that we expect it to be comparable to.
Speaker Change: Q1.
Speaker Change: We will see margin.
Speaker Change: You will see margin pressure coming off of our Q1 going into Q2, our top line for sure is going to continue to be to be strong, but our margins will be pressured by.
Speaker Change: The Turkey.
Speaker Change: Supply as we talked about.
Speaker Change: We expect.
Speaker Change: Planters to continue to recover but we don't see that full recovery until we get into the into the back half of the year.
Speaker Change: So quarter over quarter, we will see a comparable Q1.
Speaker Change: Two Q2 relative to Q1 really driven by Turkey and nuts.
Speaker Change: Okay.
Speaker Change: Apache I think if just set a different way.
Speaker Change: We're going to have gross margins that are down versus last year, but we do expect sequential improvement from.
Speaker Change: From Q1 to Q2 and as as Justin said, where those pressure points are.
Speaker Change: Really driven by Turkey and market dynamics in the second quarter.
Speaker Change: But again I think as we're thinking about not just the second quarter back half of the year and beyond the portfolio is really well positioned to drive growth and ultimately exceed historical margin levels.
Speaker Change: Okay, Great and then maybe just one follow up question. A question for you a question for John you've been now at the company for a few quarters. So I just wanted to get a sense from your perspective, how the businesses performed versus expectations and whether you see any new opportunities at this juncture.
Speaker Change: That's great refresh. Thank you for that opportunity I have excuse me had been back almost six months now.
Speaker Change: And I have been touching on three themes. So I guess I'll touch on each one of those quickly here.
Speaker Change: First it's been great to see the transformation happening in the company now that was well underway when I walk back in the door.
Speaker Change: We talk about our transformation and modernization work externally, but as a returning employee it has been striking to see from inside the company just how many important changes we are making to refresh and update and modernize the company now some of that I would say is.
Speaker Change: Things that are low hanging fruit or would be more typical in the industry.
Speaker Change: But some of it is truly work that is going to help us leapfrog with better technology, better data better processes and across the board. It's been great to see how our people have been able to elevate their work improve their decision making through that transformation. So that was kind of one big observation.
Speaker Change: Second it has been extremely encouraging to see the progress we're already making on the retail business. So the unified approach Jim mentioned earlier to one retail is clearly beginning to work.
Speaker Change: Look at the strong consumption momentum on our.
Speaker Change: Flagship and rising brands that we saw in the first quarter of the year to the stronger capabilities and bigger customer relationships, we're able to build to our first ever scale program. Jim mentioned it here for the snacks program in the first quarter. There is plenty of evidence of momentum that retailers on the right path. So that's kind of the second key key point I would make and then the third.
Speaker Change: As I think to what you were asking around the opportunity you guys see.
Speaker Change: And it really comes down to our unique portfolio that we have with hormel.
Speaker Change: So we have a very diverse and compelling roster of leading brands and a lot of that is anchored around protein. So if you think about protein. It is a wonderful place to be anchored in the food industry from a long term perspective on.
Speaker Change: On top of that our capabilities to bring convenience taste rep.
Speaker Change: Relevant innovation to that portfolio of proteins is extremely powerful so for me. The next step is bringing that journey on a very strong consumer focus and lens to that opportunity and I think we have the ability to really set ourselves apart. If you look at everything from substantial nourishing snacks, which are in very high demand.
Speaker Change: Two convenient food forward satisfying meals based around protein all throughout the day, we have a lot of opportunity so bringing that strong consumer dimension that call. It our third dimension.
Speaker Change: We will really push us forward and help propel us so yes, I guess in summary for your question extremely encouraged with the progress I've seen to date, but even more excited about the future.
Speaker Change: Great. Thank you for all the color and best of luck.
Speaker Change: Thank you.
Speaker Change: Your next question comes from Ben Theurer with Barclays. Your line is now open.
Ben Theurer: Yes. Thank you very much for taking my questions also from my side, Jim All the best for retirement, even if it's still a few months out that you need to hang out.
Speaker Change: Yeah.
Speaker Change: Wanted to just maybe go a little bit.
Speaker Change: Deeper into some of the segment dynamics, particularly in retail.
Speaker Change: It feels like you've called this out in the prepared remarks and during some of the commentary already to some of them still solid underlying growth trends and this is really just a question as to how these.
Speaker Change: Categories that you are having within retail that have been showing about positive momentum growth.
Speaker Change: In the right categories.
Speaker Change: Like tying it back a little bit into what the benefits from <unk> going to be as we as we think about this beyond 2025 into 2026.
Speaker Change: What what are your internal assumptions of like these categories that already are growing in kind of like outperforming how are they are expected to continue to perform into next year is that is that a key component in order to get to these 2026 targets.
Speaker Change: And if so what gives you the confidence that momentum.
Speaker Change: Okay.
Speaker Change: Yes. Thank you. Thank you for the question. This is John I'll take this one.
Speaker Change: To start off with just kind of looking at the retail portfolio and our confidence around it to get to that part of the question first.
Speaker Change: We love the breadth and strength of our portfolio and I'll start by saying that and I think we play broadly from the standpoint of pricing tiers number one we have accessible affordable brands mainstream brands, we play up through premium, which gives us some resilience and versatility in different economic conditions for consumer.
Speaker Change: <unk>.
Speaker Change: And the second part I'll just talk about is value right. So working closely with consumers around our brands and categories. What we hear a lot of it's not all about price. It really is about value and the way they think about value is.
Speaker Change: This is an element, but it goes well beyond so theyre thinking about quality. They are thinking about convenience theyre thinking about emotional and functional benefits of the brands and purchases. They make so when we look at that we say our balanced portfolio is really really not only a positive but it is truly a strength for us and when I talk about that is if you just look at.
Speaker Change: This moment in time with our Q1 earnings and what's underneath that.
Speaker Change: Consumers make those judgments as to is it worth it are these brands worth it right now do I want to pay and we have three very different examples in our portfolio of three very different brands delivering value in different ways and all showing very strong growth right now so the three I would call out one is applegate.
Speaker Change: Applegate is playing in the premium area around natural organic and it is experiencing extremely strong growth behind differentiated product quality brand building product innovation.
Jim Snee: And then on the other hand, we have spam, so spam historically, a more value oriented brand seeing growth from new multicultural consumers refining value by using spam as part of new ethnic food solutions and then a third example that Jim mentioned upfront is hormel Black label Bacon, where were experiencing strong growth as we continue.
Jim Snee: To raise the bar in the baking category by offering value through innovative solutions that make baked in more convenient and more accessible.
Jim Snee: Our microwave ready Bacon and our new oven ready Bacon as another example, so when I take all of that and look at it and say that's the kind of resilient portfolio that has true consumer breath right that sets us up for long term sustainable growth around our branded portfolio.
Jim Snee: And you know in the short run it looks great because we look at the consumption results, where we're building momentum. The evidence of that you can see in our Q1 consumption data, where our flagship and rising brands, which is the full collection of our growth focus brands grew over 3%, both dollar and volume consumption in the quarter and that is with planters still recovering.
Jim Snee: Outside of planters that growth has been over 5% in both dollar and volume consumption for the quarter versus prior year. So the strength of those brands really lead the way for total hormel retail to grow our dollar consumption versus prior year in a challenging environment. So as I look forward and look at the upside of these brand.
Jim Snee: As we continue to advance our consumer insights.
Jim Snee: Our marketing capability, our investment in these brands and really bring that strong consumer lens that I mentioned earlier as an even stronger dimension, we feel very good about the portfolio, we have and our ability to navigate.
Jim Snee: The years ahead with these brands and growth.
Jim Snee: Yes.
Jim Snee: Matt I think the other the other part of your question that's important to address is the impact of PNM.
Jim Snee: Ken.
Jim Snee: John did a great job talking about why we see those opportunities, but underneath that obviously as we need to be able to support innovation and so a lot of the work that we're doing in terms of reshaping the portfolio for growth, but then as we think.
Jim Snee: About portfolio optimization, and making sure that there is room for these great innovation, that's an important part of the PNM work and then also <unk>.
Jim Snee: During Q4 about hormel production system, and making sure that whereas a efficient as possible because that allows us to make sure that we have capacity to support the growth.
Jim Snee: All of these things again, the link together to give us that confidence in this retail business that John talked about overtime.
Jim Snee: Okay got it and then quick quick follow ups really I think thats for sure.
Jim Snee: Advertising investments, which was basically flat versus a year ago, but if I remember right you are guiding for an increase.
Jim Snee: So you've called out the lower investments were plant is obviously still in the ramp up here, but is that essentially the part where you were expecting to see the ramp up us you'd need to get back into the different point of sales in order to gain.
Jim Snee: To gain back the market share you lost because of the outages in Suffolk, and how should we think about the cadence of the increase of marketing expense throughout the rest of the year.
Jim Snee: Yeah, Ben I mean, you've hit it right on the head. It was we pulled back on some planners to make sure. We got the market recovery right and we said we're doing that on we're on track.
Jim Snee: We will see the sequential ramp up of investments and I think the important thing here is that we do expect a full year of double digit marketing and advertising increases.
Speaker Change: Got it thank you.
Jim Snee: Yes.
Speaker Change: Your next question comes from Thomas Palmer with Citi. Your line is now open.
Thomas Palmer: Hi, good morning.
Thomas Palmer: I know this is probably not your last earnings call, but I do want to congratulate you.
Speaker Change: Thank you Beth.
Beth: Thank you Tom.
Beth: On <unk> I just wanted to clarify it is good to hear the plant issues are resolved what about on the distribution side. How much work is left to kind of regain distribution is there a point.
Beth: Where we might see retail sales trends start to more clearly and slack and then just the level of investment.
Beth: Traditional marketing or maybe slotting fees, how much does that really start to ramp.
Beth: And how much I guess is that a consideration in <unk> versus the back half.
Beth: Okay.
Beth: Thanks for the question Tom This is John.
Speaker Change: Ground us in where we are and I think whats ahead for planters.
Speaker Change: So yes to your point, we continue to be fully recovered in our Suffolk facility and had been fully servicing our customers for planners items out of that facility.
Speaker Change: Our inventory levels are in a good position, we're beginning to ramp back up our advertising and promotions and we are seeing very clearly sequential improvement in our scanner data in terms of both points of distribution and overall consumption.
Speaker Change: To the distribution point, specifically last quarter, we talked about two different types of distribution losses.
Speaker Change: One I would characterize more as holes on the shelf as a result of just not being able to get enough product to the shelf as quickly as we want to.
Speaker Change: Those types of holes were more temporary in nature and we've recovered that distributions. The second type of distribution losses, where we didn't have sufficient supply and were taken out of a plant a gram or reset taken out of the shelf set.
Speaker Change: Those we are recovering largely the places where we haven't recovered that type of distribution, but yet is largely related to timing, meaning waiting for the customer resets, which typically happen once or twice per year. So we are recovering distribution very well sequentially and on track to continue on that path in.
Speaker Change: In terms of your question around the cost of that and any slotting investments nothing has changed with that relative to our expectations and what we have projected in our plan.
Speaker Change: Now as we continue through the remainder of the second quarter, we expect to see that sequential progress continue although I will note. We are lapping an incredibly strong second quarter of 2024 for planters.
Speaker Change: In the year ago consumption year ago comparisons are very high in the second quarter of last year moving into the back half.
Speaker Change: We begin to lap those weaker comparisons in the second half of 2024, we will continue to drive our three part plan.
Speaker Change: That is stepped up advertising strong in store promotions and increased focus on our exciting innovation and if you remember our new items, we talked about flavored cashews and the flavored nut duos both of those have proven to be highly incremental and attracting new younger households to the brand and to the category. So we're going to continue to do.
Speaker Change: Dialed that up in the back half as well and I'll finish just talking a little bit about planters in general because it continues to be a tremendous opportunity of growth platform for us the macro snacking trends are strong in particular consumer demand for nourishing snacks with substance and protein continues to grow and the substantial nature of it.
Speaker Change: Planters to have a leading brand in this space with so much innovation potential is really an ideal growth platform for us and then on top of that on top of kind of a brand specific opportunity planters opens up these portfolio opportunities for us as well.
Speaker Change: So if you think about how we're driving our new one retail operating model in particular, Jim mentioned to hear for the snacks program planter was a clear anchor for hormel in that snacks program, we anchored around planters, but then we added or other snacking platforms around that hormel pepperoni or deaths also wholly guacamole Hormel chili and we were able to creep.
Speaker Change: Our first true scale program with great success at retail so to answer the question in summary, I would say feeling very good about the sequential improvement in Q2 and about the growth we should see in the second half.
Speaker Change: Great. Thanks for all that detail.
Speaker Change: Second I wanted to ask on the input cost inflation commentary, you noted or Keith and nuts as running inflationary in the quarter.
Speaker Change: To what extent is it running consistent with what you expected you did note the higher pricing in Turkey are there pricing actions to consider.
Speaker Change: For the other commodities thanks.
Speaker Change: Yes, Tom those are the ones, we called out were higher than last year and slightly above our plan.
Speaker Change: As we think about that.
Speaker Change: We can manage commodity fluctuations because a lot of them are more pass through pricing mechanisms. So an impact, but certainly not the order of magnitude of the pressures in the Turkey supply chain.
Speaker Change: Got it thank you.
Speaker Change: Yes.
Speaker Change: Your next question comes from Michael Lavery with Piper Sandler Your line is now open.
Speaker Change: Okay.
Speaker Change: Thank you good morning, and Jim Congrats as well.
Jim Snee: Thanks, Michael.
Speaker Change: Just wanted to see if we could get a better sense of maybe some of the price.
Jim Snee: Price mix split or.
Jim Snee: Versus volume.
Jim Snee: You've talked about how the Turkey pricing is a big factor for the second half.
Speaker Change: But price mix was strong in <unk> and volumes were down so I guess one.
Speaker Change: I want to make sure we understand how much higher you expect price mix to go and what the pressure on volumes might look like.
Speaker Change: As part of the question is a follow up to your.
Speaker Change: Comments.
Speaker Change: To Peter's first question just talking about how the.
Speaker Change: What hasnt changed is the strength of the value added business in retail and it's performing well I assume that means that's playing through as obviously because it masks some of the momentum and so maybe just tying all that together how to think about where we go from <unk>.
Speaker Change: Yeah, I think the big driver.
Speaker Change: Michael and as we've talked about having planters show that sequential improvement and that's going to continue to ramp up.
Speaker Change: That's a big part of that price mix.
Speaker Change: Ratio and so having that come back into play and being in a much stronger position is really positive for us obviously, it's very accretive.
Speaker Change: And as we see that continue to ramp up in the back half of the year and of course, then with a year over year comps it'll be it'll be very favorable.
Speaker Change: And the other thing I would add to that Jim is just from a from a year over year pricing perspective in our center store portfolio, we had taken price in the second quarter of last year and so in the first quarter. You are still seeing that pricing played through and some suppression of the volumes related to that center store portfolio very much in line or a little bit ahead of our elasticity assumptions that we had built.
Speaker Change: In but that will be.
Speaker Change: Behind us as we move through the second quarter, we'll pass the lapping of that pricing that was the other dynamic.
Speaker Change: And then I guess, maybe just same question.
Speaker Change: Tweaked a little bit.
Speaker Change: In the first quarter your price mix in retail and of course, we don't have the Turkey segment separated.
Speaker Change: We don't have visibility on that like we used to but.
Speaker Change: It being in retail and foodservice.
Speaker Change: This mix this quarter was highest in about seven or so quarters foodservice. It goes even a bit further back the momentum is already very strong without the Turkey pricing coming.
Speaker Change: I guess.
Speaker Change: How much price mix should we be expecting in.
Speaker Change: Are you, suggesting that accelerates from here, there's the mix lift from planters youre pointing to as well, maybe just help us understand how high that could go.
Speaker Change: Okay.
Speaker Change: Yes, I think it really all goes back to the strength of the value added portfolio, Michael and it is.
Speaker Change: Beauty of our portfolio is value added is in retail and foodservice and it's in international and so I don't know beyond.
Speaker Change: Planters the lapping of the pricing.
Speaker Change: Haven't talked a lot about foodservice, but I think it's important to note that the foodservice segment does remain historically strong.
Speaker Change: And that top line growth has been really broad based core them. We did have some unfavorable comps expected in the first half mainly through.
Speaker Change: The divestiture of Hh out some of the marketing marketing dynamics, but they are able to be closer to the market in terms of pricing that is obviously a benefit for us.
Speaker Change: So I think really the best answer is it's the entire value added portfolio that really has had a strength for us and we expect that to continue.
Speaker Change: No that's helpful and maybe one last piece of that.
Speaker Change: <unk>.
Speaker Change: What volume expectations really should we have that's been pressured.
Speaker Change: In retail for some time.
Speaker Change: Planters piece is of course, a part of that but.
Speaker Change: With such strong pricing should we expect volumes down or or.
Speaker Change: Do you think that.
Speaker Change: You'll see them both be positive maybe what's the breakdown of just how youre thinking about the year.
Speaker Change: Yes, I mean, if you look at the.
Speaker Change: The Q1 dynamics around around volume in retail you mentioned snack nuts.
Speaker Change: No.
Speaker Change: Sure.
That is a factor and I also mentioned the pricing impacts from year ago kind of lapping those pricing impacts if you look at the consumption on our business in retail from a volume perspective.
Speaker Change: It's fairly flat despite some of those dynamics and so we believe we can continue to hold and grow volume and holding gross sales right. That's our expectation behind the strength of the overall portfolio.
Speaker Change: Okay. Thanks, so much.
Speaker Change: Your next question comes from <unk> Sharma with Stephens. Your line is now open.
Speaker Change: Great. Thanks for the question.
Speaker Change: Just wanted to get a sense of.
Speaker Change: Of what what led you to kind of reduce the.
Speaker Change: The commodity exposure.
Was there something.
Speaker Change: Something that happened during the quarter or was it was it kind of just more of an opportunistic move and just to follow up on that.
Speaker Change: You've obviously been taking steps to reduce your commodity exposure over the past couple of years was just wondering if you could quickly remind us.
Speaker Change: Where you are at.
Speaker Change: With this move now.
Speaker Change: Yeah.
Speaker Change: A great question and so youre referencing our mountain Prairie divestiture, which was really are.
Speaker Change: The last piece of our business that was in.
Speaker Change: Hog life production and so again as we looked across our organization and think about our differentiating capabilities.
Speaker Change: It's not in hog production and so we've been in that business. We've throw the PNM process as we think about portfolio optimization and even though it's on the front end of the supply chain. So an important part of the portfolio.
Speaker Change: It just doesn't make sense for us and when we think about the volatility that it could introduce from time to time, that's not the business that we're in.
Speaker Change: So I mean, it's very strategic it's very thoughtful makes a lot of sense. So we're not in a hog production side at all we certainly are in the hog harvest here at our Austin, Minnesota facility and a fairly sizable way and we think that's an important part of our business and.
Speaker Change: I think we're in a really good place on the hog side of our business.
Speaker Change: Great. Thank you for that color and just wanted to ask about the PNM real quick.
Speaker Change: You said you made progress on all initiatives.
Speaker Change: Just wondering if you could share any color in terms of the amount of progress and then.
If you could share any color in terms of the ramp for the new DC in Memphis.
Brian: Good morning, Brian.
Brian: As we mentioned, we're really off to a good start here in 2025 coming off of a solid year in 2004, where we delivered what we were what we said we would do on PNM and the Guy that we've put out for 'twenty five is between 100 to one <unk>.
Brian: <unk> hundred $50 million and we are on track to do that and yes, there will be a little bit of ramp as we go into the second half of the year.
Brian: When we think about those those numbers and where we will land.
Brian: And in general everything remains on track I mean, we feel really good about the long term and delivering 26, when we think about.
Brian: We are investing in driving driving value for the organization and so.
Brian: In terms of your your next part of your question around.
Brian: The Memphis DC I mean that of course is part of this PNM work that we're doing which is designed to enhance our inventory flow and increase our distribution capacity for that for the business. So really part and parcel of how we're thinking about our network and getting closer to our.
Brian: Our customers and reducing logistics costs with the business.
Speaker Change: Great. Thanks for the color and Jim.
Brian: Jim Congrats again on the announcement.
Brian: Thanks Corrado.
Speaker Change: Ladies and gentlemen, as a reminder, should you have a question. Please press star one.
Speaker Change: Our next question comes from Max Comport with BNP. Your line is now open.
Speaker Change: Thanks for the question on the on the last quarter, you talked about how the high end of your guidance range.
Speaker Change: Could be possible, depending on better volume better product mix improved Turkey market planters over delivery or TM over delivery it sounds like.
Speaker Change: In terms of what we've learned so far through the first quarter.
Speaker Change: That improved Turkey market piece, probably maybe not coming to question. It sounds like theres been pressure. So far so could you say coming out of the first quarter. We now view the heightened with your guidance range is less likely given what youre seeing in Turkey market just wanted to clarify that thank you very much.
Speaker Change: Yes, good morning, Max So our guidance range as we talked about before and I appreciate you.
Speaker Change: Calling out everything we said there and remembering what we said about what gets us to that high end of that range, which we considered to be a very holistic and realistic way of thinking about the range and so we are still committed to what gets us to that $1 72, which is the high end of.
Speaker Change: The range so with that.
So that's consistent right all those are the things the only thing that.
Speaker Change: Could change and it is always the case rate, Turkey could play right. Please up and down the range that we have there and that's the only thing that could change, but everything else that we talked about rate higher volume better mix right planters recover which is on track PNM delivering.
Speaker Change: That's on track right getting returns from our marketing investments all of those things are still in play and again I mean really just the Turkey dynamic here that could could skew across that across that that cadence.
Speaker Change: Okay got it thanks very much and then just on <unk>, specifically I think last quarter. There was some confusion about how to think about various targets you have on transfer my modernized in terms of what's the net target for EBIT.
Speaker Change: Most target in terms of the savings so.
Speaker Change: You have an explicit target of the TNF program, driving $200 million, plus and projected EBIT income from 23 to 26.
Speaker Change: Also the target this year of getting savings that I believe are in a $100 million to $150 million range, but can you just help us tie those.
Speaker Change: <unk> targets together, maybe give us a sense for what.
Speaker Change: When you end FY 'twenty five.
Speaker Change: How much of that $200 million.
Speaker Change: Plus an EBIT income from Tms PNM would you have expected can now have a cheap I'll leave it there. Thank you very much.
Speaker Change: Yes, Max I mean, I think the key here is to transform and modernize just continues to build right and we talk about the growth.
Speaker Change: By wheel that way, we've got in place and this is all going to continue to become more powerful and escalate.
Speaker Change: R. R. 25 guide, obviously has a portion of reinvestment as well when we think about brands people data, there's a lot going on.
Speaker Change: Again.
Speaker Change: It terms of the specific.
Speaker Change: Down I think having just walk through that with you would be really helpful.
Speaker Change: But the key takeaway here for us in terms of PNM and the success that we've seen you know off to a great start in 2025 will be another strong year and really keeps us on track to deliver against what we've what we've laid out here.
Speaker Change: Okay. Thank you very much.
Speaker Change: Thank you.
Speaker Change: There are no further questions at this time I will now turn the call over to Jim for closing remarks.
Jim Snee: Yeah, good morning, and I want to thank all of you for joining us.
Jim Snee: As we've discussed this morning, we achieved solid top line results and remain on track to deliver against our 2025 expectations.
Jim Snee: We won't do that with strong value added business in our retail segment continued broad based growth in our foodservice strong steady growth in international the significant sequential market recovery of our planters business.
Jim Snee: On track performance of our can am initiative all of those things is what gives us the confidence to deliver on these expectations, but more importantly drive long term and sustainable earnings growth.
Jim Snee: Thanks again for your time have a great day.
Speaker Change: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.
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