Financial Performance

Kraft Heinz U.S. Sales Drop Hits Q4 Earnings

“There's no question that our financial performance in 2017 did not reflect our progress or potential,” CEO Bernardo Hees says.
Matthew HellerFebruary 19, 2018

Kraft Heinz shares fell more than 3% on Friday as its latest quarterly earnings came in below analysts’ expectations, reflecting another decline in sales in the U.S.

After cutting $1.7 billion in costs by the end of 2017, the world’s fifth-largest food and beverage company is planning to ramp up spending in manufacturing, sales and distribution to help jump-start sluggish sales.

But for the fourth quarter, sales in the U.S., Kraft Heinz’ biggest market, fell 1.1% to $4.79 billion, declining for the seventh straight quarter and missing analysts’ average estimate of $4.81 billion.

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Overall, Kraft Heinz reported net sales of $6.88 billion, up 0.3% but still below estimates. Excluding items, the company earned 90 cents per share, missing estimates of 95 cents.

“There’s no question that our financial performance in 2017 did not reflect our progress or potential,” CEO Bernardo Hees said in a news release, adding, however, that “We made significant improvements in many of our businesses, and were able to accelerate some important business investments at the end of the year.”

Newly-appointed CFO David Knopf said Kraft Heinz will invest $300 million in its workforce and brands, $800 million in capital expenditures, and another $1.3 billion in pension plans, citing the benefits of the new tax law.

But in trading Friday, Kraft Heinz shares fell 3.3% to $70.30.

As Reuters reports, packaged food companies including Kraft Heinz are grappling with a shift among consumers toward fresher and healthier products. “While these companies have tried to promote their healthier products, they have often failed to gain the sort of popularity their traditional products enjoyed,” Reuters noted.

The fragmentation of the food industry has also hurt Kraft Heinz in categories like salad dressing, cheese and processed meats, Adam Caplan, a partner at Kantar Consulting, told the Chicago Tribune.

In the latest quarter, Kraft’s U.S. sales were hurt by lower shipments for nuts, natural cheese and cold cuts offset by ongoing growth in macaroni and cheese. The company said a dispute with a key retailer over promotions and shipments for its soups also had an impact.