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Kellogg Raises Sales Forecast As Price Increase Counters Strike Impact

Kellogg Co beat quarterly sales estimates and raised its 2022 forecast on Thursday, as higher prices helped counter the impact of a workers' strike at the company's US plants which led to a shortage of its cereals on store shelves.

Shares of the Michigan-based company rose 2.4% in premarket trading.

Costs Increase 

Costs from freight and ingredients such as wheat, corn and edible oils have surged in the last year due to pandemic-induced disruptions to the global supply chain, forcing the packaged food industry to raise product prices to cushion the hit to their profit margins.

Demand has so far held up stronger than expected, but analysts warn that demand, especially for the pricier cereals that Kellogg makes, could slow later in the year as rampant inflation shows no sign of cooling.

Kellogg cereal sales in North America fell by 10.3% in the first quarter, with the company blaming a near three-month long strike that started in October at its US plants, which make Froot Loops, Corn Flakes and other cereal brands.

'Small' Fire 

A small fire at one of the plants in early December further constrained supplies, the company said.

The company said it expects fiscal 2022 organic sales to rise 4%, compared with its prior forecast of an about 3% increase.

Net sales rose 2.4% to $3.67 billion in the first quarter ended 2 April.

Analysts on average had expected sales of $3.59 billion, according to Refinitiv IBES data.

Despite better-than-expected sales, Kellogg kept its 2022 adjusted earnings per share growth forecast unchanged at 1% to 2%, accounting for soaring costs and the impact of the Russia-Ukraines crisis.

News by Reuters, edited by Donna Ahern, Checkout. For more A-brand news, click here. Click subscribe to sign up for the Checkout print edition.

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