James P. Snee
Chairman, President and Chief Executive Officer at Hormel Foods
Thank you, David. Good morning, everyone. We delivered strong results in the first quarter, led by better-than-expected performance in each of our segments and we have made good initial progress on our work to transform and modernize our company. We also achieved broad-based volume growth across our businesses, reflecting the strength of our leading brands, robust demand for our foodservice products and momentum in our Planters snack nuts business. These results demonstrate our team's meaningful execution against our strategic priorities, the value of our balanced business model and marked improvements in our supply chain.
Our first quarter results were very encouraging. We grew volume in each of our segments with overall volume increasing 4%. Net sales grew 1%, led by another excellent quarter from our foodservice team. Adjusted operating margin increased compared to last year reflecting higher gross profit and disciplined cost management. Diluted net earnings per share was in line with last year, while on an adjusted basis, we grew our bottom line and cash from operations nearly doubled compared to the first quarter of last year, a direct result of our actions to better manage working capital and grow earnings. We have a clear and achievable path to deliver earnings growth and improve our business over the next three years.
And as we outlined at our recent Investor Day, we are focused on three enterprise objectives to accelerate profitable growth. First, restoring dependable operating income growth from our current businesses; second, driving savings through transformation and modernization; and third, capturing incremental value through our investments in the business. Our first quarter results demonstrate the strides we are making in each of these key focus areas.
First, our results indicate progress towards restoring sustainable and dependable bottom line growth with momentum across the portfolio. Taking a closer look by business, foodservice is off to another fast start. Volume and net sales growth were broad-based across numerous categories, led by Jennie-O Turkey and double-digit gains for products such as Hormel BACON one cooked Bacon, Pepperoni, Austin Blues Smoked Meats, and Cafe H globally inspired proteins. Segment profit increased 10%, driven by volume, mix and favorable logistics expenses. We continue to operate from a position of strength in foodservice due to our long-standing relationships, differentiated product portfolio, innovative solutions and direct sales team.
This was again acknowledged by the industry in January when we received the Distributor's Choice Award for strategic partnership by the International Foodservice Distributor Association. This honor recognized our team as the most strategic partner across the foodservice landscape. We also delivered a solid quarter in the convenience store channel led by our Planters business. Volume was strong for our snacking business and convenience driven by positive takeaway for both the Planters and Corn Nuts brands. We expect our convenience store business will continue to be a growth catalyst in fiscal 2024, led by expanded distribution of our flavored cashews, innovation in corn nuts and better service levels on planters, peanuts and trail mix items.
We also plan to further leverage the momentum in our snack nuts business to increase placements of our other items across the convenient store footprint. Our International business is also off to a better-than-anticipated start to the year as volume and segment profit both increased compared to last year. Results this quarter were very encouraging, particularly given the challenging conditions the team faced in fiscal 2023. We remain confident the International business will further accelerate over the course of the year, driven by more normalized shipments of SPAM and easing of headwinds impacting our commodity exports and growth from our partnerships around the world.
In our Retail segment, our leading brands, execution in the marketplace and recovery in Turkey supported volume growth for the quarter. Demand was strong for many products, including Skippy peanut butter, Planter Snack Nuts, Wholly dips, Herdez and La Victoria salsas, refrigerated entrees and Hormel pepperoni, which all grew volume and net sales during the quarter. Additionally, Sir Can-A data noted several positives for the quarter as we gained or maintained share across many of our products in key categories, including the SPAM family of products, Skippy peanut butter, Hormel Black Label Bacon, Jennie-O Ground Turkey, Hormel pepperoni, Planter snack nuts, Herdez salsas and sauces, and Dinty Moore stew.
While we expect our retail business to face incremental pressure from whole bird turkey dynamics and like many others in the industry, an uncertain consumer backdrop. Our team remains focused on winning with our consumers and our customers, better allocating our resources to drive profitable growth and improving the margin structure of the business. Underpinning the strong starts from our businesses, was improvement across our supply chain as we reverse the inefficiencies and higher operating costs that we absorbed this time last year.
Our supply chain improvements resulted in lower freight and warehousing expenses, lower distressed sales and higher investment income resulting from a 4-day reduction in our cash cycle. Finished goods inventory was down on both a volume and dollar basis at the end of the first quarter, and total inventory was down almost 9% compared to last year. In addition to forward progress on inventory management, fill rates benefited from the increased efficiency and overall health of our one supply chain. First quarter retail and foodservice fill rates increased compared to both the prior quarter and prior year.
And our fill rates have surpassed 97% to begin the second quarter, marking the first time since March of 2020 that we have achieved this level of service. Turning to our second key strategic area, advancing our transformation and modernization initiative. This includes the areas of supply chain efficiency, portfolio optimization, and data and analytics. We're in the early innings with these efforts, but we are pleased with the progress our team has made thus far. Notably, within our planned work stream, we are implementing a new end-to-end planning process and are integrating new planning technology. In the buy work stream, we are realizing the benefits from our new procurement and productivity programs with further savings expected across many categories, such as logistics, warehousing, and supplies.
Under the make work stream, we are standardizing our ways of working across the manufacturing network. We are also continuing to take actions to optimize our refrigerated and ambient distribution networks within our move work stream. We made progress on our total company effort to improve our portfolio. Identifying approximately 10% of the items to be optimized.
Throughout the year, we expect to use our enhanced data and analytics capabilities to identify more opportunities to better our portfolio. And to support these specific work streams and the broader goals of the organization, we formed a data and analytics office focused on creating easy access to reliable and consistent technology, data and analytics. Executing our transformation and modernization initiative remains a critical piece to our projected growth over the next three years, and I'm pleased with the team's early progress. Moving on to the third key focus area, capturing value from our investments, where our progress was highlighted by the strong momentum in our Planter snack nuts business. In the first quarter, Planters volume and dollar share maintained positive momentum, while total points of distribution and household penetration grew.
We also continue to support the brand via higher ROI advertising and an always-on strategy. Most recently, with the launch of the Planters Ah Nuts! campaign that went live in January. Innovation remains a point of focus for this business. One example is our flavored cashews line, which is delivering against our key performance indicators and remains on track to achieve its plan for the year. Importantly, this product line continues to over-index with younger consumers which is driving new consumers and excitement to the Snack Nuts category.
Over the next few weeks, we will be launching additional innovation including a salt and vinegar line extension to our flavored cashews and a new-to-market offering, Planters Nut Duos, which has the potential to be a significant contributor to the Snack Nuts category. We also continue to innovate with new varieties of Corn Nuts, including Loaded Taco Flavored corn nuts and Kickin' Dill Pickle, which is expected to launch in time for summer.
From a profitability perspective, we continue to put a heavy emphasis on redistributing our trade dollars to higher ROI promotions and channels, while simultaneously shifting mix toward innovation and premium nut varieties. These are just some of the high priority plans we have in place to keep the momentum going for our Planters Snack Nuts business in fiscal 2024 and beyond. We continue to take actions as the category leader to support the Planters and Corn Nuts brands and drive growth for our business, the category, and for our customers. In addition to the Planters business, we have many opportunities to capture incremental value from other investments and initiatives this year and into the future.
This includes driving further benefits from the Jennie-O Turkey Store transformation, our go-forward initiative and the recent investments made in capacity and automation. While we realize that one quarter does not make a year and there remains significant work ahead, we are confident that we are on the right track to deliver on our commitment to improve our business and increase long-term shareholder returns. Now shifting to our outlook. We are reaffirming our full year net sales and earnings expectations. From a top line perspective, we expect net sales growth of 1% to 3%. This continues to assume volume growth in key categories, higher brand support and innovation and our current assumptions for raw material input costs. In retail, we expect higher net sales across many of our verticals.
Targeted retail pricing actions will be effective by the end of the second quarter and are expected to impact our results in the back half of the year. In foodservice, we expect broad volume growth similar to the first quarter, led by turkey, pepperoni and bacon. This volume growth, coupled with higher raw material input markets year-over-year should support net sales gains.
We expect net sales increases in our international business to be driven by the branded export business led by refrigerated items, Skippy and SPAM, and the retail and foodservice channels in China. From a bottom line perspective, we are also reaffirming our diluted net earnings per share and adjusted diluted net earnings per share outlooks. Consistent with our initial outlook, we expect continued growth in foodservice. Improvement in our international business and benefits from innovation in retail.
Our full year outlook also assumes higher salaries, normalized employee-related expenses and costs associated with planned investments in the business. Diluted net earnings per share and adjusted diluted net earnings per share are expected to decline year-over-year in the second quarter and grow in the back half of the year. At a high level, we are assuming our stronger-than-expected start to be partially offset by incremental earnings pressure coming from our whole bird turkey business. Jacinth will provide further details on these assumptions in her remarks.
Taking all these factors into account for the full year, we expect net sales growth of 1% to 3%. Diluted net earnings per share to be $1.43 to $1.57 and adjusted diluted net earnings per share to be $1.51 to $1.65. And we expect a benefit to net earnings from our transformation and modernization initiative. In closing, our strong start to the year reflects our team's ability to execute our clear and achievable plan. We remain focused on our strategic priorities and delivering on our commitment to improve our business and drive long-term shareholder returns.
At this time, I will turn the call over to Jacinth Smiley to discuss detailed financial information related to the first quarter and additional color on key assumptions and our outlook.
