Kraft Heinz forecasts bleak annual profit as higher prices hamper demand recovery

Audio By Carbonatix

Enlarge

(Reuters) -Kraft Heinz forecast annual profit below estimates and missed quarterly sales estimates on Wednesday, as the packaged food maker struggles with sluggish demand for its products such as Lunchables and packaged meat following price hikes.

The fourth straight quarter of revenue miss pushed the company’s shares down about 5% in premarket trading.

Packaged food makers have increased product prices in the past few years to counter higher input and manufacturing costs and protect their margins.

As a result, middle-to-lower income groups, faced with still elevated inflation, have reduced spending on higher-margin products even in categories like condiments and spices.

Kraft Heinz’s overall volumes fell 4.1 percentage points in the quarter ended December 28, while prices were up 1 percentage points from the same period a year ago. Volumes were down 3.4 percentage points and prices were up 1.2 percentage points in the prior quarter.

Meanwhile, the company has boosted its marketing efforts and invested in technology to reclaim shelf space for its brands such as Mac & Cheese and Philadelphia from cheaper private-label alternatives.

These investments, coupled with higher manufacturing and labor costs, pushed down its quarterly adjusted gross profit margin 40 basis points to 34.4%.

Kraft Heinz expects fiscal 2025 adjusted earnings per share to be in the range of $2.63 to $2.74, compared with analysts’ average estimates of $3.04, as per data compiled by LSEG.

The company posted fourth-quarter revenue of $6.58 billion, compared with analysts’ estimates of $6.66 billion.

(Reporting by Anuja Bharat Mistry in Bengaluru; Editing by Sriraj Kalluvila)