Why Kellogg Didn’t Have a Good End to 2015



Kellogg’s fiscal 2015 revenue fell

As we discussed in the second part of the series, Kellogg operates with its four geographical segments. For 4Q15, Kellogg’s net sales fell ~11% YoY (year-over-year) to $3.1 billion. For fiscal 2015, the company’s reported net sales fell by 7.2% to $13.5 billion. The currency-neutral adjusted net sales rose by 1.2%. The impact of pricing in Venezuela was included in the currency-neutral adjusted net sales. Sales declined for all of the segments in 4Q15. This impacted the overall net sales.

The impact of the 53rd week in 2014 lowered the recorded sales growth by 1.3%. The impact of foreign exchange also reduced the reported sales growth by 7.5%.

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Earnings fell in 4Q15

Kellogg’s adjusted EPS (earnings per share) of $0.79 in 4Q15 fell by 7% YoY. There was a $0.06 impact from currency headwinds. The adjusted fiscal 2015 EPS fell by 7.3% to $3.53—compared to 2014. Foreign currency had a negative impact of $0.28 per share on the EPS in fiscal 2015.

Operating profit rose

Kellogg’s currency-neutral adjusted operating profit rose by 2.8% in fiscal 4Q15 and fell by 2.3% for fiscal 2015. The gross margin expansion was driven by lower input costs and savings from the Project K initiative. It boosted the North America segment’s operating profit by 3% in fiscal 4Q15. The operating profit in Latin America rose by 46%—driven by good results in Mexico, a favorable impact from the timing of investment, good overhead management, and the impact of business in Venezuela. However, it fell by 13% in the Asia-Pacific region.

Peers’ performance

Kellogg’s peers in the industry include McCormick & Company (MKC), Flowers Food (FLO), and Pinnacle Foods (PF). They had revenues of $1,030 million, $858 million, and $722 million, respectively, in their last reported quarters. The PowerShares S&P 500 Low Volatility Portfolio (SPLV) and the PowerShares Dynamic Food & Beverage Portfolio (PBJ) invest 1.1% and 2.7% of their respective holdings in McCormick & Company.


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