管理層發言
Good morning, ladies and gentlemen, and welcome to the Hormel Foods Corporation Second Quarter Earnings Conference Call. 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 require immediate assistance, please press 0 for the operator. This call is being recorded on Thursday, May 28, 2026. I would now like to turn the conference over to Jess Blomberg, Director of Investor Relations. Please go ahead.
Good morning. Welcome to the Hormel Foods conference call for the second quarter of fiscal 26. 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 Jeffrey Ettinger, Interim Chief Executive Officer; John F. Ghingo, President; and Paul R. Kuehneman, Interim Chief Financial Officer and Controller. Jeffrey, John, and Paul will review the company's fiscal 26 second quarter results and provide a perspective on the remainder of the year. 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 participants, 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 get started this morning, I would like to reference our safe harbor statements. 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 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 in isolation or as a substitute for the financial information presented in accordance with GAAP. Further information about our non-GAAP financial measures including 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 Jeffrey Ettinger.
Thank you, Jess, and good morning, everyone. We delivered an excellent second quarter, highlighted by continued top-line momentum and meaningful improvement in bottom-line performance. Our top-line results remained a clear area of strength as we achieved our sixth consecutive quarter of organic net sales growth. This performance reflects both the quality of our execution and the strategic positioning of our portfolio, as we delivered these results despite a dynamic external environment. All three segments drove net sales growth, with notable contributions from foodservice and international and momentum across certain key retail brands. As we have said before, our protein-centric portfolio positions us well to meet consumer and operator needs, and we continue to see that advantage translate into marketplace performance during the second quarter. We also delivered impressive double-digit adjusted earnings growth. In addition to our sales growth, earnings benefited from margin expansion, improved manufacturing performance, and solid results from our joint ventures, which more than offset higher logistics expenses during the quarter. This resulted in segment profit growth across all three segments and second-quarter results that exceeded our original expectations. Encouragingly, the drivers of second-quarter results align with the growth levers we shared with you coming into the year: pricing actions, mix improvements, productivity gains in our supply chain, and benefits from our restructuring actions. These were central to our second-quarter performance and are expected to drive growth throughout fiscal 26. Finally, our continued focus on enhanced collaboration across the organization allowed us to respond more quickly to an evolving environment. Given our strong first-half results and improved visibility into the balance of the year, we have even greater confidence in our ability to achieve our full-year plan. We are reaffirming our organic net sales and adjusted earnings per share expectations. Based on how the year is progressing and the underlying momentum of the business, we believe we are trending toward the upper half of our earnings range. However, we think that maintaining our current outlook is the right approach at this stage of the year and appropriately reflects near-term dynamics. While we expect the back half overall to deliver both top- and bottom-line growth, we now see third-quarter adjusted earnings to be more in line with the prior year. This reflects expected near-term cost pressures, including certain commodity inputs and higher logistics expenses, as well as actions to rebalance some inventory levels, which Paul will cover in more detail. While this affects quarterly cadence, it does not change the strength of the underlying business and is fully reflected in our full-year outlook. In summary, we are very encouraged by our performance. We drove another quarter of top-line growth, expanded gross margins, and executed with discipline across the organization. We are confident in our ability to deliver our full-year guidance and remain clear-eyed about near-term operating dynamics, leaving us well positioned for the year. We believe these results reinforce both the strength of our portfolio and our ability to drive sustainable, profitable growth over time. With that, I will turn it over to John to provide more detail on our operational performance.
Thank you, Jeffrey. Before turning to the quarter, let me start with what we are seeing in our business and across our consumer base. While consumers are under pressure and sentiment is low, food has remained resilient in recent months, particularly with growth in protein, where our portfolio is well positioned. Consumers and operators are prioritizing products that deliver clear value, whether it is convenient kitchen shortcuts, substantial snacking solutions, or affordable protein options. We are focused on helping consumers and operators make protein work better for them. Our approach to winning in protein is grounded in consistent execution: connecting with consumers in meaningful ways, delivering across usage occasions, and meeting demand across a broad range of price points. We have stayed disciplined in how we price, innovate, and partner with customers and operators, and this strategy helped drive the consistent top-line growth we delivered in the second quarter. In addition to this, as an enterprise, we executed well across our supply chain. The combination of protein-led growth and disciplined execution is apparent across our results for the second quarter. Let's start with foodservice. This was another outstanding quarter, with organic net sales growth of 7%. This marked our eleventh consecutive quarter of organic net sales growth, with broad-based strength across this portfolio. Brands such as Hormel Natural Choice, Austin Blues, Jennie-O, and Fontanini delivered strong performance. Just as important, profitability improved in the foodservice segment as market-based pricing went into effect and we realized some cost benefits across our supply chain. As a result, we saw gross margin expansion and a segment profit increase of 11% for the second quarter. In an environment where traffic remains pressured, we have been able to consistently deliver growth. Our solutions-based portfolio, combined with our direct sales force, remained a clear competitive advantage in the quarter. Working closely with our operators allows us to move quickly and deliver solutions that meet their evolving needs. In this environment, we delivered solutions across both value and premium tiers, which helped operators manage cost pressures while still differentiating their menus. Take pepperoni and our leadership in pizza toppings as an example. Pepperoni was a driver of top-line growth in the quarter, with offerings spanning traditional to artisanal and mainstream to premium. The team continued to build on that momentum through innovation. At this year's International Pizza Expo, our team launched new Calabrian-chili pizza toppings, reflecting our ability to stay close to emerging trends that will help drive traffic. We believe this kind of innovative and anticipatory mindset will continue to propel our foodservice segment. Simply put, in Q2, the foodservice segment again performed at a very high level. Turning to our international segment, we delivered a very good quarter with organic net sales up 5% and segment profit growing 20% versus prior year. These results reflect momentum across key markets and brands. China remained a driver, supported by strong demand and the success of our localized strategy. Our branded export business, led by our SPAM brand, also performed well once again, reflecting global demand and the strength of our portfolio. These results are the outcome of focused execution, disciplined investment of resources, and a clear strategy to grow in the right markets with the right brands and products. Importantly, we see continued opportunities ahead. Now to retail. Retail performed ahead of our expectations in the second quarter. We delivered 1% organic net sales growth, margin expansion, and 13% segment profit growth. Performance was strong across several key areas in the business, though opportunities remain and we are taking deliberate actions to address them. We continue to see momentum in our key growth platforms, particularly within value-added poultry. The Jennie-O and Applegate brands continue to benefit from sustained demand for lean-protein-forward offerings. Jennie-O ground turkey delivered another quarter of double-digit dollar sales growth and dollar share growth based on the latest 13 weeks Circana data ending April 19. Applegate products have also continued to build momentum, with a strong second quarter driven by frozen breaded chicken and chicken breakfast sausage. These platforms reflect how we are aligning with evolving consumer preferences and competing effectively across attractive growth segments. Another area of progress is the Herdez brand, where we expanded distribution and benefited from innovation. The salsa portfolio delivered encouraging dollar and volume consumption growth in the quarter, and we are extending this authentic Mexican brand into new occasions through entrees, marinades, and seasoning solutions. Taken together, these results demonstrate how we are strengthening our relevance with consumers and expanding our presence across the store. We also executed with a measured and data-driven approach on pricing, where we work closely with our customers to implement actions strategically and in support of the overall health of our categories. Our second wave of pricing actions was fully reflected on shelf during the quarter, and elasticities tracked largely in line with expectations, reflecting this disciplined approach. That said, we have a few opportunities across our portfolio where we can do better. In some cases, this reflects near-term timing-related dynamics including promotional lapping, where we have good visibility to recovery. In other areas, we are seeing more structural pressure, requiring targeted actions to reposition those businesses. In these areas, we are focused on improving competitiveness through price-pack architecture, more targeted promotional strategies, and sharper in-store and ecommerce execution. At the same time, we are refining assortment, prioritizing innovation, and ensuring resources are aligned to the highest-return opportunities. Overall, we are encouraged by the progress in retail and remain focused on advancing performance across the portfolio. Stepping into supply chain, we delivered solid operational results across the enterprise with meaningful improvements across our vertically integrated turkey operations. This was driven by favorable growing conditions and improved manufacturing performance. This operational excellence became a tailwind for both retail and foodservice profit growth during the quarter. During our Q1 call, we flagged freight and logistics as an area we were watching. While those costs were a year-over-year headwind, we improved execution in the second quarter to better navigate the environment and manage costs. This reflects the benefits of a more connected and responsive supply chain. Beyond this, logistics costs were further impacted by the increase in fuel price which added incremental pressure during the quarter. When you step back, the progress we are making across the enterprise through our brands, our customer partnerships, and our internal operations reinforces that the work to sharpen our strategy and strengthen our capabilities is translating into more consistent execution. We also see opportunity to move faster and unlock additional value, especially through technology. We were excited this quarter to welcome our first-ever Chief Technology Officer to Hormel Foods, Donald Monk. Donald is an exceptional leader with more than 35 years of global experience and a track record of successfully implementing modernization of technology at large global organizations. The addition of a CTO to the leadership team represents an important step in strengthening our digital and technology capabilities and enabling greater speed, agility, and impact across the business. What I have seen across the organization is a team that is motivated to win and focused on seizing the many opportunities in front of us. I have seen firsthand the power of our protein-centric portfolio and the enduring demand for our brands and products. As we look to the back half of the year, I am confident in our ability to execute, navigate the environment, and deliver on our commitments. With that, I will turn the call over to Paul to discuss our financial performance for the quarter and our full-year guidance.
Thank you, John. As Jeffrey and John noted, we delivered a strong quarter with solid performance across all three segments. Organic net sales grew 3% versus the prior year, marking our sixth consecutive quarter of organic growth. Cost of goods sold had multiple drivers throughout the second quarter. Pork and beef remained elevated relative to historical levels but overall, the commodity environment unfolded as anticipated. As John mentioned, logistics remained a year-over-year headwind for us in the quarter but not as large as we expected. Given the timing of the geopolitical conflict, the second quarter saw only a portion of the elevated fuel pressures. Despite this backdrop, we more than offset discrete cost pressures through top-line growth, market-based pricing actions, favorable mix, and ongoing productivity improvements. As a result, gross profit was up 7% versus last year and gross margin expanded to 17.4%, up 70 basis points, reflecting strong execution across the business. Equity and earnings increased 12%, mainly driven by year-over-year growth from our MegaMex joint venture. We completed an important strategic transaction in the quarter, closing on the divestiture of our whole bird turkey business. This move reinforces our focus on higher-value, less volatile, branded offerings. We recorded a loss on the transaction reflected in SG&A which drove the year-over-year increase in that metric. Adjusted SG&A was up just 2%, reflecting good cost discipline. Adjusted operating margin expanded 80 basis points. Other income increased in the second quarter primarily driven by the investment gains within the Rabbi Trust. Excluding one-time items, underlying performance was strong. Adjusted earnings per share of $0.40, up 14% versus prior year. Turning to cash flow and capital deployment, we generated $179 million of operating cash flow. Capital expenditures were $82 million. We invested in data and technology and in infrastructure to support long-term growth. We returned $161 million to stockholders through dividends, fully aligned with our capital allocation framework. We remain committed to the dividend and are proud to have reached our 391st consecutive quarterly payout. We ended the quarter in a strong financial position with ample liquidity and a conservative balance sheet. Cash on hand totaled $827 million, up $156 million since the end of fiscal 25. This gives us flexibility to continue investing in the business while returning capital to shareholders. Looking ahead, we are confident in our position for the remainder of the fiscal year. We are reaffirming our full-year net sales expectations of $12.2 to $12.5 billion and our full-year adjusted earnings per share guidance of $1.43 to $1.51. We remain confident in this guidance range, which incorporates a balanced and realistic view of the dynamic external environment. We are updating our GAAP earnings per share range solely to account for the loss on the sale of the whole bird turkey business. Let me walk you through a few key assumptions behind our outlook given our solid first half. At the segment level, our organic net sales expectations remain unchanged, including flat to low single-digit growth in retail, mid-single-digit growth in foodservice, and high single-digit growth in international. As Jeff mentioned earlier, while Q2 came in ahead, we do anticipate some cost headwinds as we move into the third quarter and the back half of the year. First, we are closely monitoring pork and beef markets. We do believe our guidance range appropriately reflects potential second-half volatility. Second, fuel is expected to remain a headwind, and logistics costs are projected to pressure results on a year-over-year basis. Execution strengthened in the second quarter but the broader logistics environment remains dynamic. We believe we have plans in place to continue to mitigate these headwinds. Third, we are taking targeted steps to rebalance certain ambient inventory levels. As we advance toward becoming an even more connected enterprise, this is a clear example of how integrated business planning is driving more forward-looking decisions. As we work through this adjustment, we do expect some near-term cost pressure, primarily in the third quarter, due to lower plant utilization. However, this action supports a more efficient operating model going forward. Finally, our effective tax rate is trending toward the higher end of our range. Overall, while we continue to expect bottom-line growth in the second half, our current view for the third quarter is that adjusted earnings will be more in line with the prior year. Turning to our recent divestiture of the whole bird turkey business, there are no changes to our previously shared assumptions related to the transaction. We still expect about a $50 million reduction in fiscal 26 net sales with minimal impact to the full-year adjusted earnings. I want to take a moment to thank the teams who led and executed this transaction. Their speed, focus, and thoughtful execution were critical in completing this work during the second quarter. In summary, the strength of our second quarter gives us confidence to reaffirm our net sales and adjusted earnings expectations for the year. We feel confident in our ability to continue delivering results. At this time, I will turn the call over to the operator and we will open it up for Q&A.
分析師問答
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by two. If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from Leah Jordan with Goldman Sachs. Your line is now open.
Hi, good morning. Thank you for taking our question. You had really strong Q2 results today, and there has also been some investor concern around input cost inflation and freight heading into the back half. Could you provide more color on the decision to reaffirm the guide today and what gave you even greater confidence in that outlook?
Thank you, Leah. I will take that question and appreciate the chance to give more color on why we are comfortable with reaffirming our guidance range on both the top and bottom line. On the top line, clearly we are rolling along. We have six straight quarters of top-line growth, and we fully expect to keep it up in the second half. We are benefiting from our protein-centric portfolio and our retail and foodservice balance. When it comes to the bottom line, we assess where we are at while recognizing that we are ahead at this point in the year. We feel we are still within the range. As I said in my comments earlier, we do believe we are trending to the upper half of the range at this point. Our ability to connect with consumers and operators, coupled with solid management of our business, makes us confident that we can deliver on our year plan and our algorithm growth. In terms of timing, we did mention some challenges in Q3, and that was covered in your question as well. We do see that quarter coming in closer to a year ago. We will have a full quarter of higher fuel expenses. Our commodity market assessment right now is running above our original plan for some cost inputs. And we will be doing some inventory rebalancing and operational changes that Paul mentioned in his comments. These factors really do not change our view of the underlying strength of our business. In reaffirming the range, we recognize that this still implies bottom-line growth in the second half, which we now expect to come primarily in Q4. Overall, we are more confident than ever in our playbook, our growth levers for the year, and our ability to deliver our fiscal 26 outlook.
That is very helpful. Thank you. Then just in a related follow-up: one of the things that really came through in your comments this morning was productivity improvements and the strength and execution there. Coming into the year, cost savings and SG&A was a big initiative. Could you provide an update on what has been done, what is still left, and whether this is the right level we should be thinking about as a percent of sales at this point? Or generally the outlook on the SG&A savings?
Sure. I will be happy to talk about that. Our SG&A initiatives are on track for the year. As Paul mentioned, Q2 SG&A was up a modest 2%. Prior to the efforts we undertook at the end of the year, we were trending at a much higher level than that. We recognized that to have our bottom line be more reflective of the top-line growth we were seeing, we needed to take actions to address SG&A. There have been meaningful benefits from this work. We have had savings that freed up capacity for growth objectives and allowed us to invest in new capabilities and talent. We are also covering SG&A headwinds such as incentive compensation. Some of the actions we took do not show up in the SG&A line when they related to costs that roll through the plants; they show up in cost of goods sold. Bottom line, we are pleased with the results we have seen thus far this year. The steps we have taken on structure and expense control seem to be working.
That is all very helpful. Thank you. I will pass it on.
Your next question comes from Rupesh Parikh with Oppenheimer. Your line is now open.
Good morning, and thanks for taking my questions. I wanted to start with the gross margin line. Better-than-expected performance in Q2 and you called out some headwinds to expect in Q3. How should we think about the outlook for gross margins in Q3 and then for the balance of the year?
Good morning, Rupesh. We did have gross margin progression across the business. If you look across the segments—retail, foodservice, and international—retail was a significant driver of change we saw. Retail had a strong quarter after a softer start to the year. Top-line consumption was positive driven by our priority brands. We saw over 1% dollar consumption growth in the quarter, driven by 3% dollar consumption growth on our priority brands. Flowing that into gross margin, we had an improved profitability quarter in retail. We experienced the benefits of that second wave of retail pricing that we discussed last quarter; that wave became more fully effective in this quarter. On top of that we had positive mix benefits. Growth in Jennie-O Ground Turkey, Applegate, and other priority brands drove favorable mix. Manufacturing benefits in the quarter buoyed both foodservice and retail. In short, manufacturing performance—driven by turkey notably—helped margins, pricing helped margins, and mix was a positive driver. That being said, on retail we still have work to do as we head into the back half. Freight costs remain elevated, commodity costs remain elevated, we will see some impact on margins arising from rebalancing inventory on select ambient items that Paul mentioned, and we still have work to do on some brands not meeting expectations. In general, we feel good about margin progression but acknowledge more work remains.
And then my quick follow-up: on retail returning to positive growth this quarter, how confident are you in sustaining momentum for the back half within retail?
We feel very good about our ability to continue driving top-line and consumption momentum in retail, particularly on our priority branded businesses. We've seen multiple quarters of consumption growth driven by priority businesses. The pricing we've put in place has performed largely in line with expectations. That said, there will be some noise in the back half. We have made strategic changes that will affect sales comparatives, including the sale of the majority of the Justin's brand and stepping back from some private-label snack nut business. The whole bird turkey divestiture impacts the retail segment as well. So while the branded part of retail is progressing well, the overall retail numbers will be a bit noisy given those portfolio decisions and timing effects.
Your next question comes from Heather Jones with Jones Research. Your line is now open.
Good morning. I first wanted to ask about the turkey network manufacturing changes you made. I would assume you had higher volume this year, which helped. Were there other changes that helped and would you expect those to continue going forward?
Good morning, Heather. Overall the benefits recognized in the supply chain were driven by volume improvements that increased throughput through our plants and favorable growing conditions that helped feed conversion and weights of turkeys processed. That combination produced improved manufacturing performance. This can be cyclical and is difficult to predict, so it is one of the elements we are watching and have included in our range guidance for the second half.
Thank you. As a follow-up, if I am interpreting your commentary correctly, year over year within retail you should have seen significant benefit from ground turkey pricing and the turkey portfolio in general, but it sounds like there was broad-based profitability growth across your non-turkey business as well. Am I interpreting that correctly, and do you think those businesses have stabilized?
You are right that we had a very strong quarter on ground turkey with double-digit consumption growth and share gains. That was an important driver. But we did see benefits across retail in margin progression beyond turkey. The pricing we took last year included items rooted in beef, pork, and nuts where we saw commodity increases, so that pricing flowing through has been important. We also saw mix benefits from businesses that delivered disproportionate growth and overall supply chain performance was strong. Outside of turkey, we had a good quarter.
Okay. Perfect. Thank you so much.
Your next question comes from Puran Sharma with Stephens. Your line is now open.
Good morning, and thanks for the question. I wanted to better understand cadence. You gave good commentary on Q3 being expected to be roughly in line year over year. On a segment level, should we expect sequential pressure in retail, or should we see some pressure in foodservice as well as we look from Q2 to Q3?
Thanks for the question. We have a few discrete items to consider going into the third quarter. First, fuel costs spiked mid-quarter. In Q2 we saw approximately six weeks of elevated fuel costs; in Q3 we will likely see most or all of the 13 weeks. Second, commodity market volatility is higher than we had planned for some inputs, particularly pork. Third, the targeted steps to rebalance inventories will create near-term plant utilization impacts in Q3. Collectively those factors drive our expectation that Q3 adjusted earnings will be more in line with the prior year. We still believe our growth levers will work across the full year. There will be some noise in retail, particularly on the top line, and gross profit margin in Q3 will likely be lower than Q2, but still improved versus our prior trend. On the foodservice side, they will see some of the headwinds from logistics and fuel, but the segment has been performing well and we expect them to remain in a good position.
Thanks. As a follow-up, would getting you to the upper end of guidance require additional pricing actions from here?
That is not one of the primary levers for reaching the upper end of the range. To get to the upper end, we are looking for foodservice to outperform, continued turkey strength, volume and mix upside, and favorable movement in commodity markets relative to our expectations. We do have some wraparound pricing that would impact results, but it's not the primary driver to reach the top of the range.
Your next question comes from Peter Galbo with Bank of America. Your line is now open.
Hey, good morning. Thanks for taking the questions. I know we've spent a lot of time talking about gross margin in the quarter, but it might be helpful to bridge the upside relative to your expectations. Can you help us understand the positive tailwind impact of manufacturing in the quarter, maybe what that was worth? I know logistics were a headwind but maybe less than expected. Any dynamics in the bridge for the quarter itself would be helpful.
Yes, Peter. We were pleased with the second-quarter results. Strong top-line performance is the starting point—you saw net sales growth across all three segments. Then pricing was an important lever; the benefits flowed through across businesses including the second wave of retail pricing. Favorable mix at the company level was another lever, with foodservice driving favorable mix and retail benefiting from priority brands. Manufacturing was a strong contributor overall; turkey manufacturing in particular performed well due to favorable growing conditions and strong plant performance, but manufacturing across the company was better in Q2. We also saw a discrete benefit from an investment gain in the Rabbi Trust, though that was not the main driver. In short, the quarter exceeded expectations due to the top-line performance, pricing, favorable mix, manufacturing improvements, and navigating logistics better than planned despite the mid-quarter fuel spike.
Thanks, John. Paul, as a follow-up, on the inventory rebalancing: is this historically something Hormel has done? How should we think about the potential impact of that discrete item in Q3 from a sales and margin perspective and the EPS impact? Also, can you comment on what you're seeing in the pork complex, given bellies are lower today?
Thanks, Peter. The inventory rebalancing is a proactive step to align inventory levels across certain areas of the portfolio. Our improved integrated business planning and production systems increased visibility to inventory, and we identified targeted opportunities to rebalance. We expect a short-term impact in Q3 through lower plant utilization, mainly on certain ambient products with longer shelf life—center-of-store canned items and similar SKUs. This is targeted, not wide-ranging, and positions us better going forward. Regarding pork bellies, that is embedded in our guidance. Bellies are lower at present, but there is variability in forecasts over the next six to eight weeks. We are taking a wait-and-see approach and have incorporated a view closer to last year in our guide for the second half.
Your next question comes from Max Gumport with BNP. Your line is now open.
Thanks for taking the question. You have higher logistics costs, the Q3 impact from lower plant utilization, fuel costs ramped up mid-quarter, and your tax rate is tracking toward the higher end of the range. These were not foreseen at the beginning of the fiscal year, but you're off to a great start and feel on track toward the upper end of the profit range. Can you talk about how much of this is cushion and conservatism in the initial outlook versus things operating much better than expected, such as the turkey network?
Max, we set realistic plans at the start of the year while ensuring the team was reaching for an aggressive but achievable goal. The plan encompassed our algorithm: roughly 2-3% top-line and 5-7% bottom-line growth, and it reflected a somewhat conservative posture. For the first two quarters, much of the outperformance has been performance-based: strong sales momentum, effective allocation of marketing and trade spending to higher-margin items, SG&A actions that began to take effect, and operational improvements. So while there was some conservatism in the plan, the majority of the upside has come from execution and performance.
As a follow-up, can you quantify how much the turkey network helped profit in Q2 and what is embedded in the second-half forecast? And for the lower plant utilization expected in Q3, can you quantify the impact to profit?
Max, we are not providing dollar quantification for those items. The turkey manufacturing network did help in Q2 driven by weather and operational performance, and that is included in our view for the year, though we are taking a cautious approach on how it will unfold in Q3 and Q4. The inventory rebalancing impact in Q3 is embedded within our guide and reflects the risks and opportunities in today's environment.
Your next question comes from Michael Lavery with Piper Sandler. Your line is now open.
Thank you. I wanted to unpack foodservice a bit. Traffic is down broadly but you had volumes up. How much of that is channel mix, share gains, or other drivers?
Good morning, Michael. We feel good about our foodservice business. Traffic remains challenged in many away-from-home channels, but our business has been resilient. Posting 7% sales growth with volume growth is a strong quarter. Our direct sales team works closely with operator partners in collaboration and problem solving mode, which allows us to build business and gain share even when traffic is down. That can include kitchen shortcuts, labor savings, affordable menu options, and innovation. For example, Calabrian pizza toppings and other new offerings bring novelty to operators and help drive menu interest. We also have broad channel coverage and flexibility to redirect resources to pockets of growth, whether commercial or noncommercial, local or national. So a combination of close operator partnership, innovation, and channel flexibility drove the performance despite broader traffic softness.
That is helpful. For guidance, the inventory rebalancing should largely be done in Q3, but you also cited a full quarter of higher fuel pressure. Looking at Q4, are you assuming relief on fuel costs or other improvements, and how do you think about the end of the year?
Q4 benefits from a couple of factors. First, we had some one-time events last year in Q4 that we are not expecting to repeat. Second, the underlying momentum of the business should be stronger in that period. Third, we do expect some easing of the specific headwinds relative to Q3—fuel, inventory adjustments, and commodity pressures—but we are not banking on a large, assumed improvement. Holding our current range signals that we expect the majority of the year-over-year bottom-line growth to come in Q4 based on those elements and continued execution.
Your next question comes from Ben Theurer with Barclays. Your line is now open. (Caller identified as Ryan on for Ben.)
Thanks for taking our questions. You called out structural weakness in certain retail brands and categories. Can you expand on the puts and takes of how that is impacting retail results, especially in context of manufacturing gains and other benefits?
We had another quarter of consumption growth in retail and were up just over 1% on a dollar consumption basis, driven by 3% growth across priority brands. That said, a couple of businesses underperformed versus expectations and we are focused on improving them. Planters did not fully meet expectations; while peanuts performed well, higher-cost nut types like cashews did not perform as well due to consumers trading down amid prior price increases. We are adjusting go-to-market plans for Planters, enhancing revenue growth management, optimizing promotions, developing new pack-size strategies, and investing in ecommerce and lower-funnel digital tactics. We continue to believe in the Planters franchise. Skippy also had a softer first half. Following the fire at our Little Rock facility late last year, we were conservative with customers and pulled some first-half promotions. We are now fully back in supply and promotions and the latest four weeks of consumption data shows significant improvement in Skippy consumption. Overall, we are confident in our ability to drive demand through targeted investments and improved execution.
Thanks for the color. One quick follow-up: you said you expect higher marketing expenses for the year, but Q2 was a touch lower year over year. Should we expect a step-up in marketing in the back half as some brands come back online?
Good question. Q2 spending was a bit lower due to timing shifts in international events. For the full year we still expect higher advertising spending year over year, focused on priority retail brands. We are aligning investment to the highest ROI opportunities and have a new enterprise marketing officer who has identified ways to get more from our spend. So yes, expect elevated, more targeted marketing in the back half with a focus on driving ROI.
Your next question comes from Heather Jones with Heather Jones Research. Your line is now open.
Thank you for the follow-up. I wanted to go back to bellies. It sounds like your second-half outlook assumes relatively flat year over year versus fiscal 25. If that is correct, then when you say you are tracking toward the upper half of your guidance, that assumes flat year-on-year bellies. Did I understand that correctly?
Yes, Heather, you heard that exactly right. Our guidance assumes pork bellies closer to last year's levels in the second half.
There are no further questions at this time. I will now turn the call over to Jeffrey Ettinger for closing remarks.
We really appreciate everyone's questions and your engagement today. To close, we delivered a strong second quarter with growth from each segment and support from our supply chain. We have taken meaningful actions to strengthen the business: simplifying where needed, improving how we operate, and sharpening our focus. We are executing with discipline on pricing, costs, and how we prioritize. That has driven the performance you are seeing today and positions us well for what is ahead. Thank you again for your time and have a great day.
Ladies and gentlemen, this concludes your conference call for today. Thank you for participating and please disconnect your lines.