Kraft Heinz misses sales expectations as demand for bacon, cheese falls
Chicago-based company says higher costs for key raw materials - including dairy and meat - forced it to raise prices
CHICAGO (Reuters) - Kraft Heinz Co on Thursday reported a 5.1% fall in quarterly sales, missing estimates due to lower U.S. demand for cheese, coffee, bacon and other products.
Kraft Heinz posted net earnings of $183 million, or 15 cents per share, compared with a loss of $12.63 billion, or $10.30 cents per share the year earlier. Thursday's results mark the one-year anniversary of Kraft Heinz reporting that surprise loss and taking a $15.4 billion writedown of key brands - a move that rocked the consumer goods industry and led to the ousting of former Chief Executive Bernardo Hees and several other executives.
Net sales were down 2.7% in Kraft Heinz's U.S. business, which makes Oscar-Mayer bacon and Kraft cheese slices. The Chicago-based company said higher costs for key raw materials - including dairy and meat - forced it to raise prices by 3.1 percentage points. It also invested in fewer promotions compared with the year earlier.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| KHC | THE KRAFT HEINZ CO. | 31.81 | +0.72 | +2.32% |
The Chicago-based company, which also makes Philadelphia cream cheese and Jell-O, said sales fell to $6.54 billion from $6.89 billion in the fourth quarter ended Dec. 28, short of the analyst estimate of $6.61 billion.
Excluding items, the company earned 72 cents a share, beating analyst expectations of 68 cents per share according to Refinitiv.
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Shares in Kraft Heinz were down 1.46% in premarket trading.
REUTERS/Arnd Wiegmann
The company also said it took a $453 million charge due to lower goodwill in businesses in Australia, New Zealand and Latin America. It also wrote down the value of its Maxwell House brand by about $213 million.
Kraft Heinz's results have stagnated for years as consumers turn to cheaper private label brands, online shopping and fashionable, non-processed and organic food. Crucially, Kraft Heinz missed out on the food industry's biggest health-trend in years: plant-based meat.
"Our turnaround will take time, but we expect to make significant progress in 2020,'' CEO Miguel Patricio said. The industry veteran was recruited last year to stabilize the struggling company.
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(Reporting by Richa Naidu; editing by Jason Neely and Steve Orlofsky)