Kraft Heinz Top Line Hit by Declining U.S. Sales -- Update
May 03 2017 - 6:40PM
Dow Jones News
By Annie Gasparro
Kraft Heinz Co. added to the bleak outlook facing packaged-food
makers, as sales of its longstanding brands fell more than expected
in the first quarter.
The maker of Oscar Mayer deli meat and Jell-O desserts on
Wednesday said first-quarter sales fell 2.7% on a comparable basis.
Sales in the U.S., where Kraft Heinz makes 70% its global revenue,
slipped 3.5% to $4.55 billion.
"There is no doubt that U.S. consumption was softer than
expected," Kraft Heinz Chief Executive Bernardo Hees said. The
company said trends improved in March and April.
Like Mondelez International Inc., General Mills Inc. and others,
Kraft Heinz has struggled with a shift toward fresh food, new
brands and ready-made meals. The yearslong slump has accelerated as
retailers press foodmakers to cut prices amid a steep fall in
staple food prices.
Kraft Heinz was formed two years ago from a merger by two former
rivals looking to fight the sales decline by cutting expenses. In
February, Kraft Heinz made an unsolicited $143 billion officer to
find more cost savings by acquiring Unilever PLC. The Anglo-Dutch
conglomerate rebuffed the offer and Kraft Heinz walked away.
Investors have speculated about what firms Kraft Heinz might target
instead as it seeks to scale up.
Mr. Hees said Kraft Heinz didn't need to acquire a competitor to
generate value for shareholders. Its stock has risen 13% over the
past year, though it declined in after-hours trading Wednesday.
Overall, Kraft Heinz's adjusted profit rose 15% to 84 cents a
share, and revenue fell 3% to $6.4 billion. Both key metrics fell
short of analyst expectations. But Kraft Heinz' operating profit
margin rose to 24.4% from 23% a year earlier, topping most of its
competitors.
Kraft Heinz is run by executives from Brazilian firm 3G Capital
Partners LP, known for their cost-cutting acumen.
Mr. Hees said people have the wrong perception that cost-cutting
comes at the expense of sales growth. "We are much more about
getting efficiency to fuel and invest behind profitable growth," he
said.
Mr. Hees said he expects comparable sales to return to growth
this year as Kraft Heinz continues to remove excess ingredients
such as artificial colors from its food, introduces new brands and
expands globally.
The company recently introduced Philadelphia cream cheese
snack-packs with bagel chips in the U.S.; sales of Planters nuts
are rising in China. Outside of North America and Europe, Kraft
Heinz's sales rose 8.1% on a comparable basis in the recent
quarter.
Ezequiel Minaya contributed to this article.
Write to Annie Gasparro at annie.gasparro@wsj.com
(END) Dow Jones Newswires
May 03, 2017 18:25 ET (22:25 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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