The Hillshire Brands Co. reported earnings for the fourth quarter and full fiscal year 2013.

In the fourth quarter, net sales of $962 million were down 2.1% versus the prior year's fourth quarter. Consistent with the company's expectations, adjusted operating income decreased 23.2% to $63 million. The lower operating income was driven by the sales decline and planned investments in brand building and innovation. Reported operating income increased to $49 million from a loss in the prior year. Adjusted earnings per share decreased 16.1% to $0.26, and reported earnings per share increased to $0.28 from a loss of $0.52 in the prior year.

For fiscal year 2013, adjusted and reported net sales of $3,920 million were up 0.4% and down 1.0%, respectively, versus the prior year. Adjusted operating income increased 12.5% to $363 million, as the benefits of lower input costs and efficiencies were partially reinvested in MAP. Reported operating income increased 290.7% to $297 million. Adjusted earnings per share increased 18.6% to $1.72, and reported earnings per share increased to $1.49 from a loss in the prior year.

"In this pivotal transition year, we are pleased with the progress we made on our plans to deliver strong and sustainable shareholder returns. This affirms our confidence in the underlying business and enables us to return more cash to shareholders," said Sean Connolly, president and CEO of The Hillshire Brands Co.

"Our strategy of strengthening our core brands through increased MAP and innovation worked well as our strong businesses became stronger and we made progress on our challenged businesses. We also achieved our fiscal 2013 savings targets and identified additional efficiency initiatives. We recognize our work is not done, and we will continue our efforts to strengthen our portfolio," added Connolly.

"As we look to fiscal 2014, we expect performance to gain momentum through the year. First half results will reflect lapping of fiscal 2013 favorability, near-term inflation, and competitive dynamics. Second half performance will be fueled by a robust innovation slate and the benefit of our cost savings programs. As we exit fiscal 2014, our company will be significantly stronger versus where we started, delivering solid growth and well-positioned for fiscal 2015."

Retail net sales declined 3.8% in the fourth quarter versus the prior year. Operating segment income declined 32.3% from the prior year's comparable quarter. This lower operating income was driven by the sales decline and planned investments in brand building and innovation.

Jimmy Dean, which has performed well all year, had another strong quarter, growing both volume and sales behind increased MAP and innovation. Breakfast sandwiches continued their strong growth driven, in particular, by Jimmy Dean Delights. The Ball Park brand also had a good quarter, growing share in hot dogs and delivering continued growth in flame grilled patties. Additionally, Aidells continued to grow behind successful new product launches, including multiple varieties of chicken meatballs.

However, sales gains were more than offset by a material change in inventory levels at a large retail customer during the quarter, the anticipated softness in Hillshire Farm lunchmeat, and pricing investments in certain categories.

During the quarter, the company successfully addressed the Hillshire Farm manufacturing issue related to the new lunchmeat package. Customer service is now back to normal levels and promotional activities have resumed.

For the full year, Retail segment sales were up 0.3% versus the prior year with Jimmy Dean, Ball Park, Aidells, and Gallo all showing positive growth behind increased MAP spend. Operating segment income for the year increased 5.5% over the prior year driven by input cost favorability.

Net sales in the foodservice segment increased 2.7% from the prior year's fourth quarter. Although the macro environment remains challenging, core foodservice sales grew in the quarter behind double-digit increases in convenience stores and high-end desserts. Commodity turkey sales also contributed to the increase in the quarter. Operating segment income decreased 13.5% behind higher SG&A and MAP.

For the full year, the Foodservice/Other segment net sales were up 0.1% and operating segment income was down 5.0% versus the prior fiscal year.

For the full fiscal year, general corporate expense was $41 million, excluding significant items, reflecting non-repeating favorability in compensation-related and other expenses throughout the year.

The company expects sales to increase slightly in fiscal year 2014, building momentum in the back half of the year. This reflects a robust second-half innovation slate offset by near-term competitive dynamics. Additionally, reduced commodity meat sales are expected to impact the company's net sales growth rate by approximately one percentage point.

Source: Hillshire Brands Co.