Hormel Foods Corp – Risk Profile
- As per GlobalData's proprietary risk methodology, Hormel’s overall risk score is 3.74, signifying a strong risk profile
- The company's country and financial risk pillars have boosted the overall risk profile of the company
- Moderate scale of operations and low fixed asset turnover ratio have negatively impacted the operational risk scores
Hormel Foods Corp (Hormel Foods) has a strong risk profile and is one of the top five leading companies based on our proprietary risk assessment of the food sector in the consumer industry. The company's country and financial risk scores fare better than the industry average. A solid liquidity position and R&D capabilities are the company's major strengths, but operational performance remains a cause for concern. 
About the Company
Hormel Foods is a meat and food processing company. The company offers fresh meats, frozen items, refrigerated meal solutions, sausages, hams, guacamole, and bacon. The company sells these products under Always Tender, Hormel, Applegate, Austin Blues, Bacon 1, Black Label, Bread Ready, Cafe H, Chi-Chi's, and Valley Fresh brand names.
Hormel Foods is one of the leaders in the food industry, with reported revenue of $11.4 billion in the fiscal year ended October 2021 (FY2021), which grew 8.51% from FY2020. However, growth in net income remained flat (0.08% in FY2021).
Risk Pillars
Our proprietary risk assessment uses a combination of four risk pillars – Country, Industry, Operational, and Financial. Scores are based on a scale of 1 to 5, 1 being the lowest risk and 5 being the highest.
Hormel Foods is one of the top five companies in the food sector, along with companies like Dali Foods Group Co Ltd, Calbee Inc, and Foshan Haitian Flavoring Food Co., Ltd.
Country Risk: The company has a country risk score of 4.88, with most of its revenue derived from the United States (93.73%). However, geographical concentration is a cause for concern for the company. Dependence on a limited area could affect the company’s operational and financial performance and increases its business risks by exposing it to the economic and geopolitical risks associated with the country, which could affect the demand for its products or disrupt the supply chain and restrict its market share and growth opportunities in the future.
Industry Risk: Hormel Foods' primary exposure is to the food sector, with 69% of revenues generated for the same sector. Around 25% of revenues are from the grocery retail sector. Lower profit margins and weak growth projections characterize both food and grocery retail sectors, resulting in an average industry risk score of 2.87 for Hormel Foods.
Operational Risk: The company's average operational risk score of 3.32 indicates a moderate scale of operations with about 14 brands under its umbrella. Moderate profitability margins and a low fixed asset turnover ratio also weigh down the overall operational risk score.
Financial Risk: Hormel Foods has a robust financial risk score of 4.18. Low leverage ratios and high liquidity position put the company at an advantage, especially while foraying into any potential opportunities arising in the market.
About our Methodology:
GlobalData risk scorecard for a sector provides the analysis of various risks a company is vulnerable to. Our risk framework comprises four pillars – country, industry, operational and financial. The country risk for an entity signifies the risk of operating in a particular country. GlobalData's proprietary country risk assessment framework is used to calculate the risk for individual countries. Industry risk is an integral part of risk analysis, and it implies the riskiness and stability of the industries in which a company operates. The operational and financial risk profile comprises a company's risk and returns potential based on its critical operational and financial metrics. Our scores are based on an average of the latest three fiscal year data.
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