Kellogg cuts costs, says cereal sales show improvement
Battle Creek — Kellogg said Thursday its struggling U.S. cereal business showed improvement in the fourth quarter, while steep cost-cutting helped mitigate its loss for the period.
The maker of Frosted Flakes, Pop Tarts and Eggo waffles has been fighting to push up cereal sales in the U.S., with Americans increasingly reaching for an array of other options like Greek yogurt or breakfast sandwiches in the morning. The troubles have prompted the company to adopt a cost-cutting plan it dubbed “Project K.”
At the same time, Kellogg Co. is trying to reinvent brands like Special K to be more in line with trends toward wholesome eating, rather than the calorie-restriction message the company concedes has become outdated. Although sales for its U.S. Morning Foods unit, which includes cereal and Pop-Tarts, were down for all of 2015, Kellogg said they rose 1.5 percent in the fourth quarter.
CEO John Bryant expressed optimism for ongoing improvement, noting that Special K sales rose 7 percent in the quarter and that the company plans to continue its revamp of the brand with a “Nourish” line that focuses on better ingredients. Bryant also cited upcoming products like Pop-Tarts in a root beer and “Orange Crush” soda flavor.
“That might sound strange, I admit,” Bryant said. But he said Pop-Tarts are popular with college students and younger adults, who respond to such new offerings. As such, he said about a quarter of Pop-Tart sales come in limited-time flavors.
For the period ended Jan. 2, Kellogg lost $41 million, or 12 cents per share. Excluding items such as restructuring charges and mark-to-market costs tied largely to its pension plans, it earned 79 cents per share.
That was higher than the 75 cents per share analysts expected, according to Zacks Investment Research. Total revenue fell 11 percent to $3.14 billion, hit by foreign currency translations, but was better than analysts expected as well.
For the full fiscal year, the company earned $614 million, or $1.72 per share, on revenue of $13.53 billion.
Kellogg’s shares rose 4 percent to $73.77 in midday trading.