Kraft Heinz forecast annual profit below estimates and missed quarterly sales estimates on Wednesday, as the packaged food maker struggles with sluggish demand for its products such as Lunchables and packaged meat following price hikes.
The company’s shares were down by 5% in premarket trading, and it was the fourth straight quarter of it missing revenue estimates.
Packaged food makers have increased product prices in the past few years to counter higher input and manufacturing costs and to protect their margins.
As a result, middle-to-lower income groups – still faced with elevated inflation – have reduced spending on higher-margin products, even in categories like condiments and spices.
An analyst with CFRA Research Arun Sundaram said, “The recovery in sales is taking longer than expected.
“In 2025, the company will likely need to invest in price to improve the performance of underperforming brands including Capri Sun.”
Results
Kraft Heinz’s overall volumes fell 4.1 percentage points in the quarter ended 28 December, while prices were up 1 percentage point from the same period a year ago.
In the prior quarter, volumes were down 3.4 percentage points and prices were up 1.2 percentage points.
Organic net sales in its top market – North America – decreased 3.6% in the fourth quarter, after falling 3.2% in the previous quarter.
Meanwhile, the company has boosted its marketing efforts and invested in technology to reclaim shelf space for its brands – such as Mac & Cheese and Philadelphia – from cheaper, private-label alternatives.
These investments, coupled with higher manufacturing and labour costs, pushed down its quarterly adjusted gross profit margin 40 basis points to 34.4%.
Kraft Heinz expects fiscal 2025 adjusted earnings per share to be in the range of $2.63 to $2.74, compared with analysts’ average estimates of $3.04, as per data compiled by the London Stock Exchange Group.
The company expects annual organic sales to be flat to down 2.5%, compared with a 2.1% decline seen in fiscal 2024.
Kraft Heinz posted fourth-quarter revenue of $6.58 billion, below analysts’ estimates of $6.66 billion.
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