James P. Snee
Chairman, President & Chief Executive Officer at Hormel Foods
Thank you, Jess. Good morning, everyone. We delivered solid third quarter results and another quarter of better-than-expected earnings. Our core business remains healthy, led by retail takeaway growth, top line growth in our food service business, further recovery in our international business and continued progress on our transform and modernize initiative. Specifically, many of our key retail brands grew during the quarter, outperforming their categories and continuing to resonate with our customers and consumers.
Our foodservice business delivered another quarter of above industry sales growth, highlighting the value of our solutions' based portfolio, direct selling team and diverse customer and operator base. We continue to experience significant recovery in our international segment in the quarter led by our global brands, and we continue to realize growing benefits from our transform and modernize initiative. We remain on a realistic and achievable path to improve our business, deliver on our commitments and execute against our long-term strategic priorities.
Going a bit deeper into our performance for the quarter, I'll start with our food service segment. Our food service team delivered another quarter of above industry growth, marking our fifth consecutive quarter of year-over-year volume growth. We grew volume and net sales despite pockets of industry softness, proving the effectiveness of our differentiated value proposition. As expected, foodservice segment profit was generally in line with last year. Foodservice segment profit remains historically strong and healthy, having grown nine out of the last 11 quarters. Our balanced approach, including our portfolio, direct selling team, and the diverse channels we operate in, continue to protect our food service segment from many macro headwinds.
We continue to see strong demand for our premium and solutions-based items including premium bacon and pepperoni, premium prepared proteins and turkey. Products such as Bacon 1 cooked bacon, Fire Braised meats, Jennie-O Turkey, Cafe H, globally inspired proteins, and old smokehouse bacon, each delivered double digit net sales gains. Additionally, innovative offerings such as Hormel Flash 180 sous vide-style chicken breast and Hormel ribbon pepperoni contributed growth during the quarter.
Our direct selling organization remains key in times of industry slowdown. Our team can connect directly with operators to strategically find solutions for their challenges, take costs out of their system and create meaningful, long-lasting relationships. We were once again named to selling Power's 60 best companies to sell for, recognizing the direct sales teams that support each of our segments, and we believe that our diverse channel presence in foodservice enables resilience in the face of industry pressures. We have continued to deliver steady top line growth in both our commercial and non-commercial businesses. Taken together, our food service business continues to be exceptionally well positioned to drive innovation, value and operator engagement.
Transitioning to our international segment, our performance in the quarter shows continued improvement versus the challenging environment we experienced last year. From a profitability standpoint, the business generated impressive segment profit growth of 78% compared to prior year. Our results in the quarter were driven primarily by greatly improved export environment. Branded exports performed well in the third quarter, with SPAM luncheon meat delivering a second consecutive quarter of double-digit top line growth. Skippy peanut butter also had a strong quarter as we expanded distribution in the South Korean market. In addition, our branded refrigerated exports continued to perform well in global food service channels.
Commodity exports, which have historically benefited the international segments top line but delivered lower profitability than other elements of the portfolio, were down significantly year-over-year. This is a result of improved inventory management and stronger sales of value-added turkey items in the domestic U.S. market this year.
Our China business continued to rebound in the quarter and is off to a strong start for the fourth quarter. An important part of China's improvement is our strategy within the retail space. We saw positive results from innovation launches with our largest retail customers in the quarter, a direct result of our in-country innovation center.
Finally, we are realizing strong results from our investments in the Philippines and Indonesia, delivering on our commitment to strategically expand our global presence and restore sustainable growth in our international business. Overall, we remain confident that we have the right strategy and structure in place to drive growth in our international business over the long term.
Shifting now to retail, where our third quarter results are a bit nuanced on the top line, so I'll spend some time explaining them. First and most importantly, there is strength in the underlying core business. We were pleased with the end market performance of key brands in the quarter according to Circana, brands such as Hormel Black Label Bacon, Jennie-O Lean Ground Turkey, SPAM luncheon meats, Skippy Peanut butter, Hormel chili, Merry Kitchen hash, Lloyd's barbecue, Applegate natural and organic meats, and Wholly guacamole grew dollar sales in the third quarter.
Additionally, we are outperforming in many of our categories. Our performance in key categories such as bacon, canned meats, turkey and peanut butter demonstrates that our investments in key brands are working. We are also optimistic about the trend line we are seeing in our convenient meals and proteins business, which has stabilized over the last quarter. We continue to support the center store with innovation, including SPAM Korean barbecue during the third quarter, which is the 12th permanent variety in the SPAM family of products. This product is garnering a lot of excitement because the flavor profile is on trend and reaching new SPAM consumers.
Second, business momentum continues in our important bacon and emerging brands verticals. The bacon vertical again delivered strong results both in terms of shipments and consumer takeaway. Black Label, raw and convenient bacon products are resonating with consumers and showed growth in dollar sales, volume and household penetration during the quarter. According to Circana, Black Label bacon is the leading growth brand in the bacon category over the last 12 months. We expect these trends to continue into Q4 as we support our bacon brands through advertising investments and introduce exciting new innovations to the marketplace, such as oven ready bacon and Black Label Cinnamon Toast Crunch Bacon.
Within the emerging brands vertical, Applegate items grew across all major categories in the quarter including bacon, breakfast sausage, hot dogs, deli meats and braided chicken. We also launched Applegate organic pepperoni, the first and only nationally available organic pepperoni. We are excited to see the results and development for this emerging category.
Growth from our key brands, our overall category performance and our innovative launches show the strength and health of our underlying core retail business. However, as we discussed during our second quarter earnings call, overall top line results in our retail segment remain nuanced. We continue to be negatively impacted by Turkey dynamics. The growth in branded Jennie-O items is being more than offset by whole bird commodity markets. Our expectations for the year have largely unfolded as discussed on our first quarter earnings call.
Next, as we mentioned on our second quarter earnings call, we experienced a production disruption at our Planters' facility in Suffolk, Virginia, which was impactful to the third quarter. Production is back up and running as we have taken corrective action within the facility. As production continues to ramp up, we have secured co-packer partnerships to help support our snack nuts portfolio to improve fill rates while we finish upgrades within the Suffolk plant. By the end of this fiscal year, we believe the production disruption will be largely resolved, and we will be in a much better position to return the business to full-service levels.
Jacinth will provide more color on the financial impacts during her commentary. I want to thank our broader team for the work they have done to help control the disruption, service the business and protect the Planters' brand. Lastly, we continue to see softness in our high-volume, low-margin contract manufacturing business. We expect continued top line headwinds in this business due to lower demand for some items. So, to wrap up our retail discussion, the underlying core business is healthy. We remain focused on working with our retail customers to drive category growth and create meaningful value for our end consumers.
Moving now to our enterprise-wide strategic initiatives, we are seeing a growing benefit from our. transform and modernize initiative. All of our pillars -- plan, buy, make, move and portfolio optimization progressed in the third quarter and the work streams continue to mature. This quarter, we are highlighting two pillars -- plan and make. For plan, significant work was done during the quarter on the implementation of our new end-to-end planning process and technology. While this upgrade will have many benefits for years to come, we are quickly generating new insights which have helped in our focus on improved inventory management. For the make pillar, our operational improvements have generated encouraging results. We continue to unlock additional production capacity and realize cost savings across our network. These wins, as well as our ongoing focus on continuous improvement across all our facilities are resulting in impactful advancements across our vast supply chain. On our fourth quarter earnings call, we look forward to providing you with a comprehensive update on our transform and modernize initiatives, including recaps from 2024 and our plans for 2025 and beyond.
Shifting now to our fiscal 2024 outlook. We are updating our net sales guidance to account for commodity market conditions, impacts from the production disruption at our Suffolk facility and continued softness in our contract manufacturing business within the retail segment. We are also narrowing our earnings guidance range as we approach the fourth quarter. This update includes an incremental impact from the production disruption at our Suffolk facility.
In our retail segment, we expect continued momentum across our key brands and categories led by Bacon, value added Turkey and emerging brands. We are also committed to supporting our brands through strategic trade and advertising investments for the remainder of the year. We are expecting successful execution of our fourth quarter innovations and improvements to our Planter service levels.
In foodservice, we expect continued broad-based volume and net sales growth led by bacon, Turkey, pizza toppings and our line of premium prepared proteins. We expect another quarter of significant segment profit growth in the international segment, and importantly, we expect continued benefits to net earnings from our Transform and Modernize initiative, which is expected to deliver its strongest level of savings in our fourth quarter.
Taking all these factors into account for the full year, we expect net sales in the range of $11.8 billion to $12.1 billion, and diluted net earnings per share in the range of $1.45 to $1.51, adjusted diluted net earnings per share of $1.57 to $1.63. We continue to demonstrate our ability to execute our clear and achievable plan, and are on track to deliver on our earnings commitments for the year.
In closing, I'd like to take a moment to recognize Deanna Brady, Executive Vice President of Retail, leader, mentor, advocate and friend. Last month, we announced Deanna's decision to retire after almost three decades of service to Hormel Foods. Deanna has impacted almost every area of our company. Her leadership during COVID and the go-forward reorganization was critical to our success, and the culture of accountability she has created will last for years. I wish her the best in her well-deserved retirement. Deanna's ambition, passion for our business and leadership will be greatly missed.
We also announced the return of John Ghingo to Hormel Foods, enabled by our intentional and well-developed succession process, we are fortunate to welcome John back to the organization to lead the retail group. John is a dynamic leader known for building strong teams and strong brands. He is the ideal person to drive continued focus, innovation and growth within the retail segment and our company. John's deep expertise in the consumer packaged goods space, coupled with his understanding of our business, positions him perfectly for success.
At this time, I will turn the call over to Jacinth Smiley to discuss detailed financial information related to the third quarter and additional color on our outlook.
