Tuesday, November 13, 2018

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Kellogg Co. Froot Loops brand breakfast cereal.

Daniel Acker | Bloomberg | Getty Images
Kellogg Co. Froot Loops brand breakfast cereal.

Shares of Kellogg are on pace for their worst day in two decades after the company slashed its full-year profit and earnings outlook Wednesday.

The company cut its earnings outlook and said it now expects full-year adjusted earnings per share to rise 7 to 8 percent, down from its prior outlook of 11 to 13 percent. In addition, Kellogg also sharply cut its outlook for operating profit from a 5 to 7 percent increase to flat.

Sales for Kellogg’s U.S. morning foods unit declined 1.3 percent in its fiscal third quarter, partially due to its recall of 1.3 million cases of Honey Smacks cereal, which were potentially tainted with salmonella. The company did receive a slight boost in this category from higher sales of Pop Tarts during the period.

Sales for its snacks business, which is its biggest unit, fell 3.5 percent in the three-month period ended Sept. 29, the company said. While Kellogg switched its snacks delivery model last year to reduce expenses, transportation costs due to a shortage of truck drivers in the U.S. took a toll on Kellogg.

Net income in the quarter rose to $380 million, or $1.09 per share, up from $288 million, or 83 cents, in the year prior. Excluding certain one-time items, the company earned $1.06 per share, on par with Wall Street estimates, according to data compiled by Refinitiv.

Kellogg reported revenue of $3.47 billion for the quarter, up from $3.25 billion the prior year and beating forecasts of $3.42 billion.

“The single hardest thing to do in consumer packaged goods is return to top-line growth,” Steve Cahillane, CEO of Kellogg, said on an earnings call Wednesday.

“Could we have pulled back on some investment in Q3 and delivered more profit?” he said. “Yes, of course. But we are leaning into investment right now.”


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