Kraft Heinz Comes Up Short of Estimates

Kraft Heinz Co just missed expectations on Wall Street for sales during the third quarter and warned that it would be hurt during the fourth quarter by many consumers in the U.S. working through emergency stores from hurricanes.

Excluding certain items, the net profit for the third largest North American food and beverage business was 83 cents a share, which was slightly better than 82 cents a share estimated by analysts.

The dip of 0.3% in revenue for the U.S. compared to increases for other companies in the packaged food industry, came during a time the company is struggling with the move by consumers as well as retailers from processed food to fresh produce.

Shares of Kraft Heinz, which has the backing of Warren Buffett the billionaire investor and 3G Capital a private equity business, fell by over 1.5% in trading afterhours on Wednesday.

Without a doubt the retail environment and in particular across the U.S. will remain dynamic as well as challenging, said CEO Bernardo Hees.

Kraft Heinz said that its  growth in organic sales in the U.S. would receive a hit of 30 basis points from southern states loading pantries during the third quarter as three hurricanes approached the U.S. mainland.

It blamed its dip during the third quarter, which was the sixth consecutive quarterly drop in sales, in part for problems with cold cuts’ shipments that would affect sales as well during the fourth quarter.

Other companies specializing in packaged foods have seen somewhat of a revival for sales in North America during the current quarterly reporting period as Mondelez reported a rise of 1.3% in revenue and Hershey a gain of 1.6%.

Like other makers of processed packaged foods, Kraft Heinz has battled with an increasing amount of Americans changing buying habits and preferring non-processed, healthier foods instead of packaged foods that are high in preservatives.

Added to the company’s problems, the major customers for traditional packaged food makers, such as Kroger, have shifted their shelf space to private label higher margin brands.

The company announced it would attempt to partner with retailers in attracting consumers from channels that are non-traditional including on e-commerce.

Kraft, which at the beginning of 2017 targeted cost cutting of $1.7 billion by year end, said that its selling, administrative and general expenses were down 19% during the just ended quarter to $652 million.

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