Quarterly earnings

Kellogg's Q2 sales weakened by soft US consumption and declining EU Pringles sales

02-Aug-2017 - Last updated on 04-Aug-2017 at 11:31 GMT

Declining Pringles sales in the EU impacted the overall bottom line for Kellogg's Q2 financial results. Pic: ©iStock/eskaylim

Kellogg’s Q2 2017 net sales have declined 2.5% year-over-year to $3.19bn, while its operating profit increased by 0.7% during the period, reported the company.

This marks the 10^th straight quarter of revenue decline for Kellogg's.

However, Kellogg's chairman and CEo John Bryant believes the "results keep us on track to deliver on our full-year financial targets, with sequential improvement in net sales performance and continued profit-margin expansion.

“More importantly, we continued to make progress toward the transformation of our company. For instance, during the quarter, we made strong progress on our transition out of direct store delivery (DSD) in US snacks,” he added.

Soft US consumption

The company’s declining sales were mainly caused by a shift in consumer preference to healthier foods in most parts of North America, Zacks Investment Research said.

Kellogg’s North America net sales declined by 2.6% during Q2 year-over-year to $2.15bn.

The US snack segment, in particular, posted flat sales of $803m.

Despite the regional sales decline, Kellogg’s US specialty segment posted a growth of 1.8% with sales of $276m.

“Across our business, we also continue to see exciting growth in emerging channels, notably e-commerce,” said Bryant.

Kashi gaining share in cereal

Kellogg’s 'North America Other' division - comprised of US frozen food, the Kashi brand and Canadian businesses - posted a 3.6% sales decrease during the period.

Frozen foods sales increased and Canada’s sales were flat, but Kashi's sales declined “owing to exited non-core businesses and previously lost distribution in snack bars.

“However, renovated and new products are gradually moderating the rate of decline, with Kashi gaining share in cereal while markedly decelerating its share declines in snack bars,” the company added.

Euromonitor data showed Kellogg's and Kashi accounted for 22.4% and 2.3% respectively of the overall US breakfast cereal market.

Pringles sales decline

Declining Pringles sales in EU - caused by the loss of promotional activities - also pulled down Kellogg’s Q2 revenues.

Bryant said Kellogg's remains committed to returning to top-line growth, as outlined in the company’s 2020 growth plan.

The company also continues to forecast a net sales decline of about 3% for full-year 2017, with DSD transition to have a one-percentage point negative impact.