Dive Brief:
- Kellogg's third quarter profit soared 42% to $292 million, or $0.82 a share, thanks to lower costs and a favorable tax rate, with all regions posting operating profit margin expansion, according to the company's earnings report.
- Quarterly net sales declined by 2.2% to $3.25 billion, due in part to a decline in the U.S. morning foods segment. Consumers purchased 1% less cereal, though that was still an improvement over last year, Kellogg chairman and CEO John Bryant told The Wall Street Journal.
- Kellogg also adjusted its full-year expectations, having raised its per-share earnings estimate to between $4.16 and $4.23, per the lower effective tax rate. The company also decreased its sales growth outlook to just under 4%, excluding currency fluctuations, compared to the prior estimate of 4% to 6% growth.
Dive Insight:
With profitability on the rise, Kellogg is primarily focused on boosting sales growth, particularly for struggling categories like cereal and morning foods. Cereal sales have declined for years, but Bryant remains confident that the segment will see a turnaround and return to growth next year.
The company has posted sales declines for the past seven consecutive quarters. A turnaround in the cereal category would be critical for the company as a whole, providing more capital for investments in its current brands and other startups that Kellogg is interested in acquiring in the future.
Kashi has been a notable challenge for Kellogg, as the brand's sales have dropped significantly compared to when Kellogg acquired it in 2000. Kellogg has made a number of changes at Kashi, including developing new flavor varieties and packaging. But as with other products in the natural and organic category, Kellogg needs to make sure Kashi and its varied products, from cereal to granola, stay on-trend.