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Why Kellogg’s Sales Could Stay Low

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Sales headwinds

Kellogg’s (K) revenue has grown healthily in the past several quarters, thanks to the company’s recent acquisitions of RXBAR and Multipro. However, its organic sales have disappointed, owing to list prices falling following its direct-store-delivery transition.

We expect Kellogg’s top line growth to moderate in this year’s second quarter, and its net sales to decline gradually in the second half of the year due to tough year-over-year comparisons. Persistent challenges in its base business and adverse currency rates could pressure its revenue further.

We expect most food companies’ net sales growth to decelerate as they annualize recent acquisitions. General Mills’ (GIS), J.M. Smucker’s (SJM), and Campbell Soup’s (CPB) top lines are likely to stay low due to tough YoY (year-over-year) omparisons and the absence of benefits from acquisitions.

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Analysts’ estimates

Wall Street expects Kellogg’s top line to grow by a low-single-digit percentage in the second quarter before falling in the second half, with its net sales falling by 3.8% in the third quarter and 4.7% in the fourth quarter. Analysts expect Kellogg’s top line to fall YoY this fiscal year.

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