Kraft Heinz Reports Weaker Sales -- Update
14 February 2020 - 2:57AM
Dow Jones News
By Annie Gasparro
Kraft Heinz Co.'s revenue fell in the fourth quarter, rounding
out a year of torpid sales for the food maker's biggest brands.
The maker of Oscar Mayer meats and Jell-O desserts reported
$6.54 billion in quarterly sales, short of analyst expectations and
down 5.1% from a year earlier. Shares fell 7% on Thursday to
$27.99.
"Our turnaround will take time," Chief Executive Miguel Patricio
said on a call. "But we are seeing the beginning of
stabilization."
Mr. Patricio, who took over last June, has shaken up Kraft
Heinz's executive ranks and has said he would substantially reduce
the number of products the company develops this year.
Kraft Heinz will spend more on marketing for its flagship
brands, especially those that are big drivers of the company's
profitability, Mr. Patricio said.
To help fund these investments in its most promising brands, he
aims to make its supply chain more efficient and reduce the
complexity of its sprawling operations.
"We are sweating the budget," he said.
Mr. Patricio came to Kraft Heinz last year after the company
disclosed accounting errors and a misjudgment of the value of its
brands that caused it to write down some $17 billion in value from
some of the company's best-known brands.
On Thursday, Kraft Heinz lowered the value of its Maxwell House
coffee by $213 million. The company also recorded noncash charges
tied to international businesses, including one in Latin America
focused on exports.
Kraft Heinz products including Maxwell House are battling an
influx of cheaper store brands that are enticing cost-conscious
shoppers, while newer and trendier brands steal more shelf
space.
Higher prices deterred some shoppers from buying Kraft Heinz's
items in the fourth quarter, the company said. It also lost some
distribution and ran fewer promotions than the prior year. Kraft
Heinz's market share in cheese, cold cuts and coffee declined. But
its condiment sales remained strong.
3G Capital, the private-equity firm that controls the company,
has stripped out nearly $2 billion in annual spending since the
2015 merger of Kraft Foods and H.J. Heinz. But the company has
fallen short of its sales goals and big new deals haven't
materialized.
"We cannot have a culture of cutting," Mr. Patricio said. "We
have to change that culture."
Mr. Patricio has a new leadership team, including executives he
tapped from Campbell Soup Co. and his former company with ties to
3G, Anheuser-Busch InBev SA. He said the top jobs are filled with
more experienced people, but that Kraft Heinz still has a people
problem.
"The turnover is still a big problem for us, especially on the
lower levels of the pyramid, and we have to stop that," Mr.
Patricio said.
Comparable sales, which exclude currency fluctuations, mergers
and divestitures, declined 2.2% globally in the latest quarter,
including a 2.7% drop in the U.S., its biggest market.
For the fourth quarter, Kraft Heinz reported an overall profit
of $182 million, or 15 cents a share, compared with a loss of
$12.57 billion the year earlier. Excluding certain items affecting
comparability, its adjusted profit of 72 cents per share beat
analyst estimates by 4 cents
Micah Maidenberg
contributed to this article.
Write to Annie Gasparro at annie.gasparro@wsj.com
(END) Dow Jones Newswires
February 13, 2020 10:42 ET (15:42 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
Kraft Heinz (NASDAQ:KHC)
Historical Stock Chart
From Apr 2024 to May 2024
Kraft Heinz (NASDAQ:KHC)
Historical Stock Chart
From May 2023 to May 2024