Sales fell 4%
For fiscal 1Q16, Kraft Heinz’s (KHC) net sales were $6.6 billion—a decline of ~4% compared to $6.8 billion in 1Q15. Currency translation and divestitures had an impact of -4.5 and -0.4 percentage points on net sales. During the quarter, sales even beat analysts’ estimates of $6.4 billion by ~1.3%.
Currency and divestitures impacted revenue to some extent. However, organic net sales’ performance improved by 1.1%. It was aided by a good balance of volume mixes and price. Pricing rose by 0.3 percentage points led by gains in most segments despite inflation in key commodities in the US and Canada. The volume mix also increased by 0.8 percentage points. This showed growth in condiments and sauces globally with particular strength in developing markets. Also, Lunchables and P3 in the US and foodservice expansion also contributed to it.
Kraft Heinz operates in four geographic segments—the US, Canada, Europe, and the Rest of World. The US segment contributed to 71% of the company’s total net sales. We’ll discuss the segment’s performance in the next part.
Other key highlights in 1Q16
Kraft Heinz’s management mentioned that they continue to expect to pay down $2 billion of debt by July 2017. Also, the company isn’t planning to commence any common stock repurchases until at least July 2017.
Kraft Heinz’s competitors in the industry are Cal-Maine Foods (CALM), Hershey (HSY), and Flowers Foods (FLO). They reported revenue of $450 million, $1.8 billion, and $858 million, respectively, for the last quarter. The Wisdom Tree U.S. Quality Dividend Growth Fund (DGRW) and the Power Shares QQQ Trust (QQQ) invest 1.1% and 1.8%, respectively, of their portfolios in Kraft Heinz stock.