Kraft Heinz (KHC.O) on Wednesday tempered its annual forecasts for organic sales and profit as repeated price hikes hurt demand for the packaged food giant’s branded products including Lunchables meal kits and Oscar Mayer cold cuts.
Shares of the Jell-O maker fell more than 3 per cent before the bell, as it also posted a steeper-than-expected fall in revenue for the third quarter.
“Steep declines in a few brands are holding back overall results. Lunchables, in particular, has been the largest drag on sales, and Kraft Heinz may need to accelerate investments to turn this business around,” said CFRA Research analyst Arun Sundaram.
Following price hikes over the last few years, Kraft Heinz has turned to promotions as value-seeking consumers cut back spending on packaged food items such as Capri Sun and Mac & Cheese.
Overall volumes at the company declined 3.4 percentage points, with prices rising by 1.2 percentage points in the quarter.
“When we look at our US Retail business, we are expecting more of an elongated recovery, driven by specific categories that continue to experience pressure,” CEO Carlos Abrams-Rivera said.
Customers have pivoted to cheaper, private-label alternatives, prompting packaged food makers like Kraft Heinz to reduce prices in the US on some items such as sauces and mayonnaise.
The company forecast annual organic net sales to be at the low end of its earlier range of flat to down 2 per cent from last year, while adjusted profit per share is now expected to be at the low end of its prior range of $3.01 to $3.07.
Inflation in coffee and dairy led Kraft Heinz to narrow its adjusted gross profit margin growth target to the lower end of its 75-to-125-basis-point range.
It earned 75 cents per share on an adjusted basis in the third quarter, beating analysts’ estimates of 74 cents, according to data compiled by LSEG.
Net sales fell 2.8 per cent to $6.38 billion, compared with estimates of $6.42 billion.
