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Analyzing Kraft Heinz’s 2Q17 Results

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Part 2
Analyzing Kraft Heinz’s 2Q17 Results PART 2 OF 4

Why Kraft Heinz’s 2Q17 Sales Missed the Estimate

Sales versus consensus

Kraft Heinz’s (KHC) sales of $6.7 billion fell short of analysts’ consensus estimate, falling 1.7% YoY (year-over-year). Weak volumes due to a decline in consumption, mainly in the United States (SPY) (SPX-INDEX), lower pricing, and adverse currency movements took a toll on the company’s top-line performance.

Why Kraft Heinz’s 2Q17 Sales Missed the Estimate

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Kraft Heinz’s organic sales fell 0.90% during the reported quarter. Pricing fell 0.40% as higher promotional pricing in North America and Europe more than offset the price increases in the rest of the world market, mainly in Latin America. Meanwhile, volumes fell 0.50% as improvement in condiments and sauces were more than offset by lower shipments of meat, cheese, and food service in the United States.

In comparison, Kellogg, Conagra Brands (CAG), General Mills (GIS), and Mondelēz International (MDLZ) also saw sales fall during their last reported quarters amid the industry-wide slowdown.

Segment performance

The company’s sales in the United States fell 1.2% to $4.6 billion, reflecting lower volumes and pricing. Volumes decreased 0.80% due to distribution losses in the meats and cheese category coupled with lower shipments in food service.

In Canada, the company’s net sales fell 6.4% to $0.60 billion as higher promotions and lower volumes remained a drag. Pricing decreased 3.7% due to higher promotional spending. Volumes were also affected by the discontinuation of select cheese products.

As for Europe, net sales came in at $0.60 billion, a 4.9% fall YoY, due to the adverse impact of currency movements. The Rest of World segment’s net sales rose 1.6% to $0.90 billion, reflecting higher pricing.

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