Kraft Heinz misses sales estimates as higher prices deter customers
KRAFT Heinz missed Wall Street estimates for first-quarter sales on Wednesday (May 1), signalling inflation-weary consumers were pushing back against its higher-priced branded lunch combos, mac and cheese, and meat cold cuts.
Shares fell 6 per cent in early trading as the packaged food maker also signalled second-quarter organic sales to be similar to the first due to unplanned maintenance.
Americans relying on government support for buying groceries are hunting for value this year, prompting Kraft-Heinz and peers to rejig their products and strategies following years of price hikes.
Overall volumes fell 3.2 percentage points in the three months ended Mar 30, while prices rose 2.7 percentage points across Kraft-Heinz’s portfolio. Prices have on average increased 8.1 percentage points over the past three years, according to Reuters calculations.
The Jell-O maker said on Wednesday that price increases would be targeted to products witnessing higher raw material costs such as dairy, sweeteners and coffee.
Kraft Heinz said volume of products sold on promotion was higher year on year as it leaned on offers to help aid a recovery in volumes across its markets.
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The company still expects overall volumes, which have declined for the last two years, to turn positive in the back half of the year.
“We think that expectations into the print were a bit higher for KHC than for some others in our coverage. Posting only an in line quarter and lower-than-expected organic sales growth outlook for Q2 could weigh on the shares,” said Citi analyst Thomas Palmer.
The Heinz ketchup maker’s net sales came in at US$6.41 billion, slightly below analysts’ average estimate of US$6.43 billion, according to LSEG data. It was the company’s fourth straight quarterly sales miss.
The company flagged about 50 to 100 basis points hit to current-quarter total organic net sales growth due to a temporary maintenance shutdown at a factory that makes products for its North America Away From Home business.
Adjusted earnings per share of 69 cents was in line with analysts’ estimates. REUTERS
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