Good morning, ladies and gentlemen, and welcome to the Hormel Foods Corporation's Fourth Quarter Earnings Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press 0 for the operator. This call is being recorded on Thursday, December 4, 2025. I'd now like to turn the conference over to Jess Blomberg. Please go ahead.

Good morning. Welcome to the Hormel Foods Corporation conference call for 2025. 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 hormelfoods.com, under the investors section, along with supplemental slide materials. On our call today is Jeff Ettinger, interim chief executive officer, John Ghingo, president, and Paul Keenan, interim chief financial officer and controller. Jeff, John, and Paul will begin by reviewing the company's fiscal 2025 performance, before transitioning into commentary on our outlook for 2026. We will conclude with the Q&A portion of the call. The line will be open for questions following the prepared remarks. As a courtesy to the other analysts, please limit yourself to one question with one follow-up. At the conclusion of this morning's call, a webcast replay will be posted to the Investors section of our website and archived for one year. Before we start this morning, I'd like to reference our safe harbor statement. 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. Please refer to our most recent annual report on Form 10-K and quarterly reports on Form 10-Q, which can be accessed on our investor website under the Investors section. Additionally, please note we will be discussing certain non-GAAP financial measures this morning. Management believes that doing so provides investors with a better understanding of the company's underlying operating performance. 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. Further information about our non-GAAP financial measures, including our comparability items and reconciliations, are detailed in our press release, which can be accessed on our website. I will now turn the call over to Jeff Ettinger.

Thank you, Jess, and good morning, everyone. Today, we'll briefly review our fiscal 2025 results then shift our focus to the strategic priorities and outlook for fiscal 2026. I'll begin with a few reflections on the year and our path forward. Paul will provide additional detail on key drivers from 2025, and then John will share our vision for 2026 and the actions we're taking to deliver consistent growth. I'll conclude with our fiscal 2026 outlook before we move on to Q&A.

Fiscal 2025 was a challenging year. Candidly, we fell significantly short of our earnings goal. In navigating a dynamic consumer environment, elevated input costs, and some unexpected setbacks, our bottom-line performance was disappointing. On the other hand, net sales exceeded $12 billion, representing 2% organic growth over the prior year, and supported by gains across all three segments. We delivered four consecutive quarters of year-over-year organic net sales growth. This demonstrates the strength of our protein-forward portfolio. In the retail segment, our leading brands continue to hold number one or number two share positions in over 40 categories. Brands such as Jennie-O, Applegate, Holy Guacamole, and Spam contributed strong growth for the year. Importantly, the Planters brand grew net sales year over year, despite first-half pressures arising from last year's production disruption. Collectively, these brands represent a wide range of consumer preferences, diverse value propositions, and eating occasions. Profitability was pressured across the retail segment, and this decline is reflected in our segment margins. Input cost pressures driven primarily by heightened commodity costs had a challenging impact across our broad retail portfolio in 2025. The food service segment continued to outperform the broader industry by leveraging our direct sales team, operator-driven innovation, and diverse channel presence. Our top-line strength was wide-ranging across many brands and categories, including the Jennie-O Turkey portfolio, fire-braised meats, Café H globally inspired proteins, branded pepperoni, and branded bacon. These products all showcase the premium protein-centric offering that operators desire. The broader industry, however, experienced traffic declines and did not grow as expected. This, coupled with higher input costs, tempered the food service segment's 2025 results. The international segment's results highlight the importance of having a balanced portfolio, as some geographies outperformed while others lagged. Our China business was the biggest contributor to the international segment's…

Thank you, Jeff. Good morning, everyone. I'm looking forward to connecting with many of you over the coming months. Let's take a closer look at our results. As Jeff mentioned, net sales exceeded $12 billion for the full year of fiscal 2025. Top-line strength continued in the fourth quarter, as total company organic net sales grew 2% compared to the prior year. Profit was challenged this year, and value-added growth was more than offset by year-over-year margin pressures related to higher commodity input costs, supply chain impacts of avian illnesses, and some discrete items, each of which I'll dive deeper into. As previously shared, persistent inflation in key commodity inputs exceeded our expectations and remained elevated compared to prior year levels. Specifically, we experienced over 500 basis points of raw material cost inflation during the fourth quarter alone. For the fiscal year, pork bellies increased approximately 25%. The pork cutout rose about 10%, and pork trim increased approximately 20%. Beef remained a significant inflationary pressure across the industry throughout the year. With respect to Turkey, as you'll recall, early in fiscal 2025, we were impacted by avian illnesses across our Turkey supply chain and the broader industry. Decreasing Turkey supply in the industry had the compounding impact of higher commodity prices. In the fourth quarter, we saw the return of HPAI cases, especially across the Midwest. Collectively, these developments caused challenges during fiscal 2025, and we anticipate continued Turkey supply constraints through 2026. As we previously discussed, we took pricing actions at various times during fiscal 2025. However, due to the timing of some cost inflation, we could not fully offset the margin impacts within the fiscal year. In addition, two unfortunate events took place during the fourth quarter: a chicken product recall and a fire at our Little Rock…

Thank you, Paul. In fiscal 2025, our protein-centric portfolio demonstrated strength with consumers. We leave the year ready to build off our top line by leaning into our portfolio of winning brands and products. Protein demand isn't a passing trend; it's a sustained growing priority for so many different consumer groups. Hormel Foods Corporation is excited to lead the way in delivering real protein solutions for everyday occasions. As we turn the page to 2026, we have every reason to be confident. We are focused on winning in attractive consumption spaces by positioning our brands and innovation where they have the most significant opportunities and prioritizing our resources to fuel growth. Hormel Foods Corporation holds a truly unique position in the food industry, an advantage we've built over many years. We have a balanced protein-centric portfolio with broad capabilities to create value and win with proteins. This, coupled with our extensive reach across retail and food service channels, provides a strategic advantage that we believe is compelling and unmatched in today's industry. We've evolved from a meat company into a consumer-focused company. But unlike other consumer food companies, we are the consumer company that wins with protein. We deliver winning protein solutions for breakfast, lunch, dinner, and every snack in between. At home or away from home, animal-based or plant-based, whether you're cooking or someone's cooking for you, Hormel Foods Corporation is ready to provide great-tasting solutions aligned with some of the most enduring consumer trends in the food industry: ease and convenience, flavor experiences, and the growing desire for more protein. Today, I'll share three focus areas that will guide us in 2026. The first focus is consumer obsession. We already have a strong foundational understanding of our consumers and operators. But in 2026, we are taking that a…

We said on our third-quarter call that our goal is to return to the algorithm of 2% to 3% organic net sales growth and 5% to 7% operating income growth. These goals are intentionally ambitious but are grounded in the strength of our portfolio and take the broader food industry environment into consideration. We are providing fiscal 2026 guidance with a slightly wider range than our growth algorithm. This approach accounts for the dynamic current environment and supports our flexibility to navigate near-term volatility while remaining firmly focused on the strategic priorities John just outlined. Let's turn now to our guidance and the key assumptions behind it. In fiscal 2026, we expect organic net sales growth of 1% to 4%. As John discussed, we think our protein-centric portfolio coupled with our demonstrated strength and presence in both retail and food service puts us in an advantaged strategic position going forward. We already saw momentum on the top line in fiscal 2025 and plan to build on this momentum in fiscal 2026 through enhanced marketing support. In fact, a number of these campaigns are already underway, as the holidays are a key season for many of our strategic brands. Our guidance also accounts for pricing actions across our portfolio. The steep increases in input costs in '25 precipitated two waves of pricing actions on many products, and the realization of the second wave will allow us to restore more balance with these inflated costs. In fiscal 2026, we expect adjusted operating income growth of 4% to 10%, and adjusted earnings per share to be in the range of $1.43 to $1.51 per share. Regarding key input cost assumptions in our outlook, we expect pork input costs to decline compared to fiscal 2025, but still remain above the five-year average. Beef costs…

Ladies and gentlemen, we will now begin the question and answer session. Touch-tone phone. You will hear a prompt that your hand has been raised. If you would like to withdraw from the polling process, please press star then the number 2. If you are using a speakerphone, please make sure to lift your handset before pressing any keys. Your first question comes from the line of Michael Lavery from Piper Sandler. Please go ahead.

Thank you. Good morning. You touched on some of the cost expectations and how the T&M initiatives would be continuing and some of the other administrative savings. But could you maybe just unpack guidance a little bit further and give us some of the key puts and takes to keep in mind and just how to think about, you know, peeling that onion a little bit further.

Sure, Michael. Thank you very much. This is Jeff Ettinger answering. So we'll start on the top line where we said we expect organic net sales growth of 1% to 4%. We already have substantial momentum on the top line, with all four quarters last year generating top-line growth and driven by all three segments, and we expect that kind of momentum to continue. As John described, we think our protein-centric portfolio coupled with our presence in both retail and food service puts us in an advantaged strategic position. In terms of other specifics that will help the top line in fiscal 2026, we'll be benefiting from the pricing actions that have already taken place, and then we also will have enhanced marketing support, some of which kind of roll in in Q1 or at the very beginning of Q2, already supporting many of our key brands. When it comes to the bottom line, we've guided to adjusted operating income growth of 4% to 10% with the midpoint of a 7% growth in fiscal 2026. We have taken several steps to help our bottom-line performance catch up with our top-line momentum. So first of all, there is that pricing flow-through, which will better match up with costs as the year goes on. Secondly, we expect to drive mix improvement, and the marketing focus will help us to do that. Third, we do expect continued benefits from the T&M program. Fourth, we have the savings from the work, and I'm sure we'll be able to provide more details about that in further questions on the call here this morning. And then lastly, we do expect some relief from pork costs, particularly in the second half of the year, although we're still facing some headwinds in beef and nut costs. So overall, I mean, I guess our theme is we believe our guidance is realistic and achievable and demonstrates the value of our balanced protein-centric portfolio.

That's helpful. Great color. And can I just add a follow-up on portfolio reshaping you touched on in the prepared remarks and gave a couple of examples? It sounds like is that more of a starting point and that you would be doing a bit more review there? Or how would you sort of assess maybe some of what you've just announced versus what may still be to come?

Hi, Michael. This is John. I'll take that question. So thank you. Yep. Portfolio reshaping certainly is an ongoing effort for us, and it's a strategic one. We continue to look at strategic categories and brands and making sure we're building our portfolio around our growth ambitions and, also, importantly, looking at how do we simplify our operations. Really, all of it is about positioning Hormel Foods Corporation for sustainable long-term growth. So if you think about simplifying operations, that includes exiting nonstrategic businesses and ensuring we have the best owner for our brands and product lines. You know, the example I mentioned earlier around Justin's, Justin's is a wonderful brand, but a better fit in the hands of the strategic partnership that we've created. Given its overall size, the opportunity it has for growth in confections, which is a nonstrategic category for us, was an opportunity that we saw. So I would say overall, you know, our actions reflect a deliberate strategy around portfolio shaping, all intended to streamline and position our company for sustainable profitable growth and allowing us to really focus on that premise I mentioned, which is nourishing protein solutions.

Okay. Great. Thanks so much.

Your next question comes from the line of Tom Palmer from JPMorgan. Please go ahead.

Good morning and thanks for the question. Jeff, in the prepared remarks, you said you expect stronger Turkey markets in your guidance. I just wanted to clarify around that since there are several Turkey products you sell, including ground turkey, where there was some pricing midyear and then deli meat. What are you assuming in the outlook for whole bird pricing? Spot prices are obviously up quite a bit, but I think you still have contracting to finalize over the coming quarter. So I think at times, you know, you guys have indicated it might be too early to embed much change in guidance until you start to capture it in contracts.

Okay. So this is John. Tom, I'll jump in on that one and just talk turkey a little bit. I'll kind of pull back overall on Turkey in general for us and kind of, you know, come down to some of the areas you're touching on. So, you know, first, Turkey continues to be a very important business for us, very important for the consumer. And in particular, our focus around value-added turkey, ground turkey continues to be a winning formula for us. From a consumer demand standpoint, ground turkey in particular is a great option for consumers, very versatile, plugs in very well to everyday life, food experiences, different meal experiences. So in terms of creating value in a strained consumer environment, we love our ground turkey business. Second, I'll comment that there certainly has been some volatility in the markets and the industry. You'll recall that in 2025, we saw a run-up in costs in the first half of the year around Turkey and our supply chain. We said we needed to take price. We did that. We implemented pricing actions in the back half based on that inflation that we saw. We actually weathered that pricing well on our ground turkey business, driving both top-line growth, market share improvements, and profit recovery. So we're managing the volatility well, I would say, coming from a position of strength with Jennie-O. As we support the brand well, serve our customers well is absolutely critical. That being said, you know, the markets have continued to fluctuate. Certainly, that does impact our pricing. And coming to your point around whole birds in particular, I would say, you know, our guidance or expectations for the year include somewhat elevated whole bird prices throughout the year, although I will point out to your question, it's early, and very little is settled at this point in terms of the market. We still need to see sell-through from this holiday season as one factor in that. So you know, that's the position of where we're at now. And, again, from an overall standpoint, you know, we love the turkey business. Consumers looking for lean protein. Our ground turkey business continues to be a winning business for us that we're gonna drive.

Great. Thanks for that. And then maybe this question will catch you off guard, but I wonder if you might share a bit of the expected savings from your restructuring work.

Yeah. Hi. This is Jeff. I didn't answer your last question, so I owe you this one. Right? So as we talked about, we made the difficult but responsible decision to reduce expenses, ultimately resulting in a 250-position workforce reduction, which is about 9% of our corporate and sales group. Significantly, the other aspect of this that we focused on was really making sure we had the right structure going forward. We were able to reduce layers in many areas, and we also targeted expenses, including certain benefit programs. This work has resulted in meaningful savings and will free up capacity for growth objectives and our company initiatives. We designed the program to deliver gross savings in the range of two to three times our expected cost to implement. And we expect that the payback timing will be quick within the first twelve months, although in terms of quarterly cadence, it doesn't really kick in till the beginning of the calendar year, so the first two periods of Q1 really don't have this benefit. I also want to point out that you won't see all of this flow through as a direct reduction in SG&A because some of these gross savings are being reinvested in people and in brands and technology. Some of the benefit actually gets reflected in the cost of goods instead of SG&A. And some will cover incentive resets. Let me also pass over to Paul to give you a little more specific for modeling purposes.

Yeah. Great. Thanks, Jeff. All in, the work we've done for SG&A has allowed us to anticipate adjusted SG&A as a percent of net sales comparable to the prior year, inclusive of meaningful step-up in marketing and advertising investments. Maintaining prior year rates of spending, reallocating resources to what will drive our brands and company forward in the best way is an important lever to our growth story for fiscal 2026 and beyond.

Great. Thanks for the details.

Your next question comes from the line of Ben Theurer from Barclays. Please ask your question.

Hi, good morning and thank you very much for taking my question. A lot to digest literally, but I wanted to go back into some of the comments and the outlook more particularly as it relates to Planters. So obviously, you've picked some decisions within the nut business on the private label side, but just wanted to understand where you are in terms of the journey of recovering on Planters of what you've lost in terms of where are you in shelf space, where are you on the profit side, just to understand how we should think about the cadence into fiscal 2026 of further delivering from the Planters business? That would be my first question.

Great. Great, Ben. Good morning. I'll take it. It's John. Yeah. Planters continues to be a very important brand for us in our portfolio, and we are very bullish overall on Planters going forward. Last quarter, I mentioned that we had started growing Planters again. And now I am very pleased to say that we are fully back in growth mode behind Planters. And I mean that both in the near term as well as in the potential we see for Planters in the longer term. So when I talk about the near term, we are clearly delivering the gains we expected to see in the marketplace. I'm pleased to report that in the latest thirteen weeks of consumption data, we've seen Planters plus 12% in dollar consumption and plus 6% in volume consumption versus prior year. This is largely, to your point, driven by distribution gains. Distribution is up 13% versus prior year in the latest thirteen weeks, and base sales are up over 10%. So the specific question around distribution, our distribution recovery is just about complete at this point. We are nearly all the way back to where we were prior to the supply disruption, and we are gaining share in the growing snack nut category. I also mentioned last quarter that our top-line momentum is good. Our consumer recovery is on track, but our profit recovery has been somewhat hampered. You know, that continues primarily driven by mix shifts related to consumer trading out of cashews. You may recall that last year, cashews saw significant price increases that were precipitated by commodity inflation. We love the fact that we have a brand and an equity with the Planters franchise that's big enough to keep all those consumers in the franchise as they trade among nut types, but that does drive some mix implications for us from a profitability standpoint. So as we go forward, you know, we'll continue to build on that top-line momentum. We are gonna begin lapping that cashew pricing in 2026. And, you know, we are adjusting our go-to-market plans to take advantage of our broad portfolio to drive more favorable mix, and we continue to focus on, you know, our three-part plan that we've talked about before, attracting consumers to the brand, stepped-up communications and advertising, strong in-store promotions, increased focus on our exciting innovation that's proven to be highly incremental to the brand and the category, and we just continue to love Planters as a snacking platform as consumers are migrating to snacks with substance, snacks with protein, we love the fact that we have this leading brand in that space.

Perfect. And then second, I mean, obviously, you've done a lot. We had some impairment charges within your international business, which you've highlighted was Indonesia-related. But within international, you called out the dynamics in Brazil, the challenges down there. So we know it was a venture. It's a relatively small business. But given some of the initiatives you're doing in terms of portfolio review, we've seen the Justin's thing. I mean, there's a lot just going on. So how should we think about that venture in Brazil? Is that still part of you want to be there, or is that something you would be open to put up for sale to literally have an even cleaner story maybe on the international business with more of a focus in Southeast Asia, Asia, and not so much with a venture as well in Brazil that has been causing, I guess, more headache than smiles? So just your take on Brazil, that would be appreciated.

Yeah. Sure, Ben. It's John. I'll take that one too. Look. I would say, you know, just a couple of general comments about our international business. You know, number one, our China business does continue to perform very well for us. That is a strategic priority. It's a focus. Two, we have seen good success on our branded export business, you know, headlined by Global SPAM. That continues to do very well for us. To the questions around, you know, what's held us back, certainly, you know, there are parts of the export business in terms of more commodity-type products that have been more of a struggle recently. And then Brazil, for sure, has been a drag, you know, in terms of our overall performance. To come to your question around portfolio, certainly, you know, my earlier comments where everything is under review, we do continue to look at our portfolio in total for what makes sense, what doesn't. And we'll continue that process as we go through 2026.

Thank you. Perfect. Thanks, John.

Your next question comes from the line of Heather Jones from Heather Jones Research. Please go ahead.

Good morning and thanks for the questions. I guess I wanted to start with the assumptions on raw material input costs. Specifically pork. So it seems like the recovery and productivity for the industry from disease is trending above expectations, and we're set up for decent supply growth in '26. So it's just trying to get a sense of you said above the five-year average, but below '25. But I was just wondering if you could give us a little more detail as far as, like, how you're thinking about the year-on-year decline in raw materials, particularly given how much bellies and trim have already retrenched from the summer highs?

Yeah. Thanks, Heather. This is Paul. You know, the first quarter has begun. Pork, shrimp, beef remain a headwind year over year, like you mentioned. Yeah. I'm starting to see some year-over-year relief in bellies. We have announced also targeting pricing actions to address the markets. In food service, there's no changes to our pricing. You know, we do have beef and nut headwinds as we look at the full year of fiscal 2026 in our guidance. And then to your point, you know, improving pork benefits in half two is kind of what we've modeled internally.

If I could add, Heather, this is Jeff. Just kind of further response to your question. You know, there's modeling for the whole year that we need to do. But one of the things I think we've realized over the last three to four months is we really need to be more real-time responsive to changes in the market. So in response to this heightened market volatility, we're refining some of our processes to drive greater agility in forecasting and managing commodity risk. You know, one example would be we're gonna couple our external forecasting sources with some of our real-time internal knowledge about factors affecting the commodity market. So, you know, we can predict what we think will happen in H2 and how much recovery there is, but we need to be better at it than reacting to what really goes on.

That's helpful. Thank you. My second question is just you have a number of tailwinds going into '26, whether it be potentially lower raw material costs in pork, the turkey markets, the lapping of, you know, nonrecurring things. And you mentioned the headwinds of beef and nuts, and you're gonna raise your advertising spend. Well, just wondering as you were putting together your guidance and all, just if you could give us a sense of how much the consumer environment factored into your outlook? Like, are you assuming a still tough consumer all the way through '26? So just how are you thinking about food service traffic and just know it's a really big question, but just trying to get a better sense on how you're thinking about demand.

Well, it's so big, Heather. It's gonna take two of us to answer. It's all starting in Jeff, and then Jonathan will talk about the consumer. I do want to give a little more color to all of you on the call today about cadence. So we do expect Q1 earnings to be pressured still compared to last year, and we're actually looking at probably 2 to 4¢ below year ago. As a realistic range because we still have spillover effects on the bottom line. In terms of the pricing actions, they're not all fully implemented in Q1. In terms of the commodity input costs, as you correctly point out, they started to come down, but they do remain elevated. We have some turkey supply issues still from the turkey illness issues. As I mentioned a minute ago, we have the timing of the SG&A benefit, which will help us through the year, but not particularly in Q1. So although we expect Q1 earnings to be pressured compared to last year, we then are confident in our growth guide for the remainder of the year. But it does pull down the full year in terms of how that factors in. On the consumer side, John?

Yeah. So thanks, Heather. I'll talk a little bit. I mean, I think the consumer environment, I would still say the consumer is quite strained. You know, feeling the cumulative effects of inflation, feeling some of the uncertainty in the macro environment, consumer sentiment remains quite low. So as we look out to 2026, I mean, we are factoring that into our guidance, meaning we expect the consumer to continue to exhibit value-seeking behavior throughout the year. We believe our portfolio is well-positioned to provide value in a number of different ways. From a food service perspective, aligned with external forecasts, we expect flat to little growth in the food service industry in total. But, again, we love our solutions-based portfolio. We love our food service model. In terms of the channel diversification we have across small and large, across different types of channels, across commercial and noncommercial. So we love our channel resilience. We love our direct sales force. We love the types of solutions we provide to operators who value our partnership even in difficult times when traffic is down. So we feel like we have a good set of answers to the challenging environment, but we are modeled and forecasting a continued, you know, difficult environment from a consumer standpoint throughout 2026.

Very helpful. Thank you so much.

Your next question comes from the line of Pooran Sharma from Stephens. Please go ahead.

Thanks for the question. I was just wondering if maybe you could give us a sense of kind of how much you're planning to invest back in the business. I know in terms of T&M, and I know you're walking away from given T&M targets going forward, but what you had given in the past was $75 million in FY '24 and then $100 to $150 million in FY '25. I was just wondering if you're able to give us a sense of how much of that you know, you were planning to you had invested back into the business or just give us a sense of how much reinvestment you're planning to drive back into the business?

Yeah. Thanks for the question, Pooran. I think, again, I'll this is Jeff, and I'll start, and John will conclude on your question. So I do want to point out on T&M. So this is the final year of our current program. Doesn't mean we've made any permanent decisions about where we go from here. And it really has played a critical role and delivered significant value to the company. We have continued efforts scheduled for this year, a number of specific projects, but we have found that breaking out the financial benefits separately seems like it hasn't been particularly helpful, and in some cases, has caused confusion. So we're not providing that breakout, but we do expect to see financial benefits in 2026, and they'll kind of be spread between the marketing enhancement that you're asking about. We're also gonna use some to offset continued inflationary pressure. And then, hopefully, to allow us to expand margins. And I'll hand it over to John then.

Yes. Good morning, Pooran. So in terms of how we're thinking about that reinvestment behind our brands, you know, we're spending largely in a concentrated way behind our focus brands. You know, there's a couple of points to that. One is think about our brands like Planters, SPAM, Jennie-O, as well as critical innovation that we know is important in the market to deliver that value for consumers right now. Driving our investments behind those brands is one of the levers we have to drive positive mix into 2026 and create some of that margin momentum. Second, I will say on those businesses, we do have a very good handle and analytics around return on investment behind those marketing investments. And most importantly at this moment is it's absolutely critical that we support our brands through the pricing. You know, we know that the consumer is strained. We know that we've taken multiple waves of pricing that we've talked about. It's inflation-justified pricing. It's needed. But the consumer is strained. And so our ability to support our brands well through those pricing actions is actually, for us, proven to be the recipe for success to successfully implement those pricing actions and to be able to continue the category and brand momentum we want to see. So that's how we're thinking about our stepped-up investment into 2026.

Great. Great. Appreciate the color there. On the follow-up, was maybe just hoping to dive into Cadence just a tad bit further. Appreciate the color you just gave on 1Q. And just thinking about 2Q through 4Q, and the recovery, in FY '26, is it more of a gradual recovery where you're gonna see a sequential recovery quarter to quarter from February to 4Q? Or is it more of kind of like a step up in the back half and a little bit of recovery in 2Q? If you're able to just provide any color around that would be helpful. Thank you.

Sure. Thanks, Pooran. This is Jeff again. Yeah. We do expect after the first quarter challenges to see an acceleration of benefit. Realistically, as you get to Q4, you're now against a quarter that, as we talked about, had 3¢ of one-time incidents. And so, you know, that clearly should be a more beneficial quarter. So the middle ones will be more modest increases, and then the Q4 should be more substantial.

Okay. Thank you very much.

Your next question comes from the line of Leah Jordan from Goldman Sachs. Please go ahead.

I just wanted to go back and dig in a little bit more on Heather's second question. Given the fact that you're planning for revenue growth in each of your segments next year. Just seeing if you could talk more about the drivers between price and volume for each segment. I mean, we've got some pricing in retail, but there's maybe some lower costs that will come through in the back half, and we've got the quicker pass-through on foodservice. So just how should we think about those elements in the mix of a more challenged consumer environment?

Hey. Good morning, Leah. This is Paul. So on the segment detail guide, all in for fiscal 2026, we expect retail to have modest declines in volume with low single-digit increases in net sales. Foodservice, low single digits. Increases in volume with net sales in the mid-single digits. And then international also expecting low single-digit increases in volume with high single-digit increases in net sales. And as Jeff has stated, segment profit growth by all three segments, for the course of the year.

Okay. Great. Thank you. And then maybe just some comments around the competitive overall across your categories in retail. I mean, are you seeing from peers as you start to put through some targeted pricing in some areas? And then, but you're also kind of planning for incremental brand investments as well. So just the competitive environment overall. Thank you.

Yeah. Sure. I can take that. This is John. Good morning, Leah. So you know, from a retail perspective, we do feel very good about the top-line momentum we're seeing across the retail business despite what is a choppy and competitive environment and that strained consumer backdrop. When you look at the drivers underneath that consumer performance, you can see in the scanner data our flagship and rising brands continue to perform well. In the latest thirteen weeks, they were up 3.7% last year. That carried our total Hormel Foods Corporation portfolio to over 1% consumption growth in the latest thirteen weeks. You know, some of the standout performers, you know, Jennie-O, Grand Turkey, where we're up double digits, we're certainly, you know, pacing ahead of the competition. Planters back to double-digit growth, also pacing ahead of the competition. We're seeing good strong growth in our rising Mexican brands. Holy Guacamole and Ardes grew 75% respectively. Applegate continues to grow. So we like our portfolio. We like the momentum we have on retail. We have taken, as we've talked about, you know, multiple waves of pricing action. In the last quarter call, we talked about that we had announced a wave of pricing that we were gonna monitor if we needed additional pricing as we got deeper into the quarter and saw the markets continue to rise. We did, in fact, announce another wave of pricing which largely will benefit us in the second quarter. To your point around, you know, how do we maintain that momentum? How do we feel competitively? We're gonna continue to invest in our brands. We're gonna continue to invest behind core brands as well as our innovation to weather that competitively. And all in all, you know, we certainly see competitive activity in some of the categories, you know, that is aggressive. But we feel like we have, you know, good differentiated positions. We know where our growth is needed to come from, and we're going to continue to invest in those spots.

Very helpful. Thank you.

Your next question comes from the line of Max Gumport from BNP Paribas. Please go ahead.

Hey, thanks for the question. I was hoping for an update on tariffs, particularly if there are any expenses particularly such as those associated with cashews? That you incurred in FY 2025 that might not repeat in FY 2026? Due to recent exemption? And then if so, if you could quantify that impact for us.

Yeah, Max. This is Paul. Thanks for the question. Overall, a message on tariffs, really, we feel that we're fairly insulated. Obviously, the global environment remains dynamic, and it's ever-changing. For '26, the range that we think that we'll have on tariffs is $25 to $35 million. And it's mainly related to supplies in steel and aluminum. Obviously, we were watching cashews until the recent announcement of the removal of reciprocal tariffs. We haven't really quantified that exact amount that we had in '25. To give you a range on the twenty-sixth question.

Okay. I think that $25 to $35 million, is that roughly in line with the total tariffs that you saw on your P&L in '25, though? I think you had quantified a 1 to 2¢ impact, I believe, in the '25.

Yep. So for a full-year basis, that is correct.

Okay. Great. Then that takes me to my second question, which would be it feels like there's plenty of discrete items you have in fiscal year 2026 that will be a help to your profit growth. So you mentioned admin savings. I think you said it was two to three times the cost to implement, which I think is $20 to $25 million the cost to implement. Correct me if that's wrong, but if that's right, that would be maybe at the midpoint roughly $60 million in savings. And not all of that is gonna flow to the bottom line. Some of it gets invested, but let's assume half flows to the bottom line. That's $30 million in profit growth. You've got the chicken recalls that you're lapping, the fire at the Little Rock facility that you're lapping. So that's another $20 million or so in profit growth. So now we're at $50 million of profit growth. Your guidance is for $40 to $100 million. And, you know, you've also got a benefit coming from T&M, again, some of which gets reinvested, but some of which flows to the bottom line. And then whole bird turkey pricing. So I was hoping just to get a bit more color on sort of what's what am I missing? What's dragging you down? Is it other forms of inflation that can't be and nuts? Just one just, you know, given these discrete factors, I'm trying to get a better sense for what might be holding you back and sort of keeping the low end of the range at 4%. Thank you very much.

Okay. Alright. I'll start, Max. This is Jeff. I mean, you're correct that the $20 to $25 million number in terms of the one-time cost is what we've reported. And so your math of the two to three times, you know, works in that regard, and you correctly pointed out that that ends up being, you know, the total available savings, but then we are going to be reinvesting parts of it in certain areas. I think a couple of other factors that we probably could point out to you that might mitigate your math a little bit. You know, one, I'll remind you again about Q1. So, you know, we start out the year in somewhat of a hole. So you know, the implied rest of the year is quite a bit higher than 7% then. And so that does factor in some of the advantages that you're citing. Secondly, I mean, I think the other thing that maybe models miss that we've talked about in the past is in the pricing area that while we're in reasonably good position to be, you know, current to the cost on the food service side with some lag, in retail, it's a more complex decision. And there are cases where, okay, if we're yes. The costs are up this much, but if we price to that same equivalent amount, it's gonna really harm the long-term future of the brand. There are times where we've chosen not to do that. And so some of the math factoring into how we think 2026 plays out has that factored in as well.

Got it. Thanks very much. Appreciate the color.

Your next question comes from the line of Rupesh Parikh from Oppenheimer. Please go ahead.

Good morning. This is Erica Eilah on for Rupesh. Thanks for taking our questions. So I wanted to dive a little bit deeper into gross margin. So obviously, under pressure here in Q4 because of some of those discrete items. But maybe you could just walk us through some of the high-level puts and takes how you're thinking about gross margins for the year, maybe and in terms of cadence, how we should think about the recovery there?

So when you think about the gross margins for the year, I think, you know, obviously, we've got you know, in '25, like you mentioned, we obviously had impacted by the commodity inflation with 500 bps year over year in Q4 alone. The chicken product recall in the Little Rock fire obviously drove that as well. You know, Planters' top line is performing well, but as we said last quarter, we're balanced with mixed dynamics on profitability. So those are really the margin dynamics in '25. As we look in '26, we obviously got gross margin expansion with mix improvements. A lot of pricing flow through over the course of the year in different ways that John already described on the call here, and then we've got T&M savings going forward as well. In the final year of the transform and modernize project.

Okay. Thanks for the call. And then just on inventory, so I think inventory was up, you know, about 11% in the quarter. Just curious how you're feeling about the health of your inventory from here?

Yep. No. Great question, Erica. Overall, we feel very comfortable with our inventory levels. And as you know, they are up year over year, but they actually went down in the fourth quarter. The biggest driver of that increase in inventory is the commodity markets that are boosting the balances. And then we made strategic decisions on pounds to increase where the center store business for the colder months and weather events. And lapping last year, we also had the Planters issue in the Suffolk plant, so we've got a replenishment there. But overall, we feel very comfortable with where inventory levels are today.

Very helpful. Thank you.

Your last question comes from the line of Yasmeen DeWandi from Bank of America. Please go ahead.

Hey, guys. Good morning. Thanks for the question. Can I just ask on Turkey specifically? So we know that Turkey was a $0.25 headwind to fiscal 2023. And then roughly a $0.15 headwind to fiscal '24. Could you just help us bridge the $0.25 impact, so what was full-year Turkey headwind or a tailwind to earnings in '25?

So, good morning, Yasmeen. Just to give you a little bit of color on Turkey. So I mean, in general, we saw a lot of, I'll say, increased cost in Turkey in 2025. You know, we were able to land on our ground turkey business the pricing we needed to cover that. In terms of, you know, how that played out for the year, those first-half pressures really hit us quite hard. And we were able to, you know, balance that back in the second half and offset those first-half headwinds with the improved results in the back half. In terms of whole birds, they did come in somewhat better than expected compared to our original outlook from fiscal 2025. But it was, you know, obviously a very, I'll call it, volatile year on Turkey. And we weathered it quite well from a competitive standpoint and the recovery in the back half of the year. You know, all in all, it was a benefit in 2025.

Okay. Great. That's helpful. Thank you. And then on raw materials inflation, you had said last earnings that, I think 3Q was roughly 400 bps. How much was it in 4Q? And how should we think about it in '26 on a quarterly basis given there's typically some seasonality there?

Yep. Thanks, Yasmeen, for your question. In quarter four, it was a 500 basis points of raw material cost inflation during the fourth quarter. So the second part of the question, direct you to Jess and having more internal discussions there.

There are no further questions at this time. We have no further questions at this time. So I'll turn the call back to Jeff Ettinger for closing comments. Sir, please go ahead.

Thank you very much. Since we're already running over, I'll I just want to express my thanks to everyone for taking the time to follow us today.

Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.