- Kellogg Co. reported a 24% earnings hit for the second quarter as the strength of the dollar impacted international sales and domestic demand for cereal and other packaged foods slowed. The company said the results were expected.
- The U.S. morning foods segment reported a 2.3% currency-neutral comparable net sales decline, though the company said that trends in the cereal business are improving.
- Other domestic segments showed similar performances, including a 1.8% decrease in currency-neutral comparable net sales for the U.S. snacks segment and 1.2% drop in currency-neutral comparable net sales for the U.S. specialty channels segment.
Changing consumer preferences for healthier foods are driving down sales for some of Kellogg's major product lines, particularly breakfast foods and cereals.
While its profits tumble, Kellogg is implementing Project K to trim its workforce and cut costs, but those savings haven't taken effect yet. These latest earnings were in part influenced by initial cash costs from Project K, so it may take some time before cost-cutting efforts are realized.
Over the weekend, Kellogg reached an agreement with the Bakery, Confectionery, Tobacco and Grain Millers union to keep the company's four cereal plants open for the next five years, which involves about 1,300 jobs. However, Kellogg has "the flexibility to optimize production lines as the category continues to evolve," the company said, according to Battle Creek Enquirer.