Kraft Heinz Co on Thursday missed quarterly sales estimates due to lower demand for products like bacon and cheese, and wrote down the value of some businesses - including coffee brand Maxwell House - by $666 million.
Kraft Heinz's sales have been muted for fourteen straight quarters as consumers turn to cheaper private label brands, online shopping and fashionable, non-processed and organic food. Thursday's results mark the one-year anniversary of Kraft Heinz reporting a surprise loss and taking a $15.4 billion writedown of key brands - a move that rocked the consumer goods industry and led to the ousting of former Chief Executive Bernardo Hees and several other executives.
"Our turnaround will take time, but we expect to make significant progress in 2020," CEO Miguel Patricio said. The industry veteran was recruited last year to stabilize the struggling company.
Kraft Heinz took a $453 million charge in the fourth quarter ended Dec. 28 due to lower goodwill in businesses in Australia, New Zealand and Latin America. It also wrote down the value of its Maxwell House brand by about $213 million.
The company, which makes Oscar Mayer cold-cuts and Kraft cheese slices, said fourth-quarter sales declined 5.1% due to lower US demand for cheese, coffee, bacon and other products. Kraft Heinz said higher costs for key raw materials - including dairy and meat - forced it to raise US prices by 3.1 percentage points. It also invested in fewer promotions compared with the year earlier.
Net earnings were $183 million, or 15 cents per share, compared with a loss of $12.63 billion, or $10.30 cents per share, the year earlier.
At the time, the company also slashed its dividend by 36% and disclosed an investigation into its accounting practices by the US Securities and Exchange Commission. In the year since, Kraft Heinz has announced further writedowns, scrapped its full-year adjusted earnings outlook, and is still under SEC investigation.
Brazilian private equity firm 3G and billionaire Warren Buffett engineered the merger of H.J. Heinz and Kraft Foods in 2015 - the value of Kraft Heinz's stock has sunk about 60% since the deal. Under top executives installed by 3G, the company made aggressive cost cuts that critics say ate into investment in brands and marketing.
Shares in Kraft Heinz were down 2.2% in premarket trading on Thursday.
The Chicago-based company, which also makes Philadelphia cream cheese and Jell-O, said sales fell to $6.54 billion from $6.89 billion, short of the analyst estimate of $6.61 billion. Excluding items, the company earned 72 cents a share, beating analyst expectations of 68 cents per share according to Refinitiv.