Hormel Foods Corp. had its worst stock decline since 2008 after narrowing margins sparked concern about the maker of Spam and other supermarket fare.
The profit margin for Hormel’s refrigerated-foods shrank to 11.9 percent last quarter before interest and taxes, down from 14.4 percent in the previous three months, according to Jefferies Group analyst Akshay Jagdale. That shift, combined with pork-industry trends, is likely to limit the company’s upside, Jagdale said.
Hormel has been boosting operating profit in its refrigerated-foods division, which accounts for about 48 percent of sales, amid low pork prices. Now, that growth is slowing. The division’s profit gained 13 percent last quarter, following a 65 percent jump in the previous period.
“Sequential decline in refrigerated margins should keep a lid on the stock,” Jagdale, who has a hold rating on Hormel, said in a report on Wednesday.
The shares tumbled as much as 8.8 percent to $35.39 in New York, the biggest intraday decline since October 2008. The stock had been down 1.9 percent this year before Wednesday’s plunge.
News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.
