Hillshire Brands solid in first quarter

Hillshire Brands reported net sales of $984 million for the first quarter of fiscal 2014 — that’s a 1% increase from the prior year’s first quarter, driven by positive pricing and mix in the company's foodservice/other segment.

Retail net sales showed a slight dip of 0.7% in the quarter versus a strong prior year comparable. Favorable mix was more than offset by lower volumes and lower pricing, reflecting higher above-the-line marketing investment.

“I’m pleased to report a solid start to the year,” said president and CEO Sean Connolly. “Although input cost inflation has been significantly higher than anticipated, we continue to make good progress with our brand-building efforts. In particular, I’m encouraged by the overall strong consumption trends we’ve seen.”

As it moves into the second quarter, explained Connolly, the company has begun to take additional pricing actions.

“While this will pressure volumes as consumers adapt to higher price points, we still expect sales trends to improve in the second half behind a robust innovation slate,” added Connolly. “We also still expect gross margins to improve in the second half, fueled by both our pricing actions and our cost efficiency programs. Accordingly, our full year guidance remains unchanged at this time.”

Jimmy Dean grew volume and sales behind double-digit growth in breakfast sandwiches and grew share in the fast-expanding frozen protein breakfast category. Ball Park increased sales in the low single-digits with solid performance in hot dogs during the key grilling season and continued strong growth in flame-grilled patties. Aidells continued to be a strong performer for the company, driven in part by the new meatball innovations outperforming expectations.

Consistent with its expectations, effective promotional programs on Hillshire Farm lunchmeat re-engaged consumers, resulting in strong volume growth trends exiting the quarter.

Net sales in the foodservice/other segment increased 5.7% from the prior year's first quarter versus a relatively easy comparable. The increase was driven by pass-through pricing to cover higher input cost inflation, as well as favorable mix and higher volumes. Excluding commodity meat sales, net sales increased 5.2%.

While the foodservice/other segment performed well in the quarter, the macroeconomic environment is expected to remain challenging, and the outlook for the segment remains modest.

Consistent with its strategy to acquire on-trend brands, the company completed the previously announced acquisition of the Golden Island jerky brand during the quarter.

Hillshire Brands' portfolio includes brands such as Jimmy Dean, Ball Park, Hillshire Farm, State Fair, Sara Lee frozen bakery and Chef Pierre pies, as well as artisanal brands Aidells, Gallo Salame and Golden Island jerky.



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