Kellogg U.S. segments slide despite profit growth
Despite year-over year-growth in earnings, the Kellogg Co. on Wednesday posted losses across several U.S. segments, causing the stock price to plunge 8.9 percent by close of trading.
The Battle Creek-based cereal and snack food company said it was increasing investment in brand building as well as single-serve, on-the-go packages for products such as Cheez-Its and Pringles to boost sales. The extra costs, however, cut into profits.
For the third quarter of 2018, the Battle Creek-based cereal and snack food company posted a profit of $396 million, up 19 percent for the same quarter in 2017. Per share, earnings were $1.09, rising 31 percent from last year.
Kellogg's sales rose nearly 7 percent to $3.5 billion from the previous year, boosted by a nearly 9 percent increase from the acquisition of RXBAR protein bars and the consolidation of Nigerian distributor Multipro.
"We have shaped our portfolio toward growth," Kellogg's Chairman Steve Cahillane said on a call Wednesday morning with analysts. "We’ve made good acquisitions and have successfully integrated them."
Growth in North America, however, fell in the U.S. snacks and specialty segments. A salmonella recall in June of Honey Smacks took the cereal off shelves and hurt the U.S. breakfast food division.
Still, the company said its investments are helping. Kellogg's reported its comparable sales rose 0.4 percent driven by U.S. frozen foods and international markets such as Asia and Latin America.
Higher-than-expected expenses for single-serve packages, however, created a loss on profit instead of the prior projected 5-7 percent growth. The company uses a third party for these products, but it is working on installing in-house packaging capacity.
Kellogg's increased its projected net sales outlook to 5 percent for the year at the higher end of its guidance. It, however, projected its earnings per share to be at the lower end of its guidance at as low as 7 percent.