New York: It’s going to take more than a little bit of sales growth to mollify Kraft Heinz Co investors.
The shares declined in late trading, even after the maker of ketchup and Oscar Meyer hot dogs posted its first-ever sales increase. Underneath the revenue expansion, which still fell short of analysts’ expectations, was a weak performance across a swath of categories including nuts, cheese, meat and coffee.
“There’s no question that the retail environment, particularly in the United States, will remain both dynamic and challenging,” Chief Executive Officer Bernardo Hees said in a statement.
Kraft Heinz shares fell as much as 3.1 per cent to $75.30 (Dh276) in late trading after the announcement. The stock has dropped 11 per cent this year.
Investors’ patience may be wearing thin as Kraft Heinz struggles to create meaningful sales growth two years after the company was created via a blockbuster merger engineered by billionaire Warren Buffett and private equity firm 3G Capital. The food giant also hasn’t been able to grow via acquisitions — its $143 billion takeover bid for Unilever earlier this year was rebuffed.
Cost-cutting goal
3G Capital is better known for trimming expenses than building brands, but with Kraft Heinz nearing its cost-cutting target and no deals consummated, pressure is high to grow internally. Updates to core products, including organic Capri Sun juice and hot dogs with fewer artificial ingredients, haven’t shown a big payoff yet.
Kraft Heinz posted third-quarter sales of $6.31 billion, just short of analysts’ forecast of $6.33 billion. The organic revenue expansion of 0.3 per cent from a year earlier didn’t meet the estimate of 1.5 per cent.
There was optimism about food companies earlier this week after both Mondelez International Inc. and Kellogg Co. reported sales growth for the first time in years. That raised expectations for Kraft Heinz, and the actual numbers just weren’t enough to convince investors that a sustained rebound is underway, according to Ken Shea, an analyst at Bloomberg Intelligence.
Kraft Heinz will have a difficult time breaking out of a broader slump for food, he said. “These guys are closely tied to the sluggishness in the U.S.”
