Mondelez Sales Sag in North America

By Annie Gasparro Features Dow Jones Newswires

Mondelez International Inc. said its sales edged up on a comparable basis in the first quarter, boosted by gains in Latin America.

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The maker of Oreo cookies and Trident gum generates most of its sales outside the U.S., and has benefited from a rising middle-class population in emerging markets. However, uncertainties about the global economy, including potential trade tariffs in the U.S., have weighed on Mondelez.

"We had a solid start to the year despite challenging market conditions, " said Chief Executive Irene Rosenfeld.

With the company posting better-than-expected results for the March quarter, share rose 2.9% in after-hours trading to $45.

Organic sales in Latin America rose 3.7% from a year ago, making it the top gainer among the company's geographic divisions.

However, economic uncertainty and changes in eating habits pressured sales in the developed world. Europe, which dealt with Brexit and other events, still had first-quarter organic sales growth of 1%.

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In North America, organic sales retreated 1.9%.

Mondelez, like its peers, is dealing with consumers in America and other developed markets eschewing big brands to shop for more fresh and prepared foods. Retailers in the U.S. are pushing for Mondelez and others to offer more discounts to boost sales, but the companies want to avoid sacrificing their profit margins.

Over all for the period, the company posted a profit of $630 million, or 41 cents a share, up from $554 million, or 35 cents a share. Excluding certain items, adjusted earnings were 53 cents, up from 51 cents a year earlier.

Revenue slipped 0.6% to $6.41 billion.

Analysts surveyed by Thomson Reuters had expected adjusted earnings of 50 cents on revenue of $6.37 billion.

Write to Annie Gasparro at annie.gasparro@wsj.com

North America was the only region where Mondelez International Inc.'s comparable sales fell in the first quarter, as food makers struggle with a turn by U.S. consumers toward fresher foods.

The maker of Oreos and Trident, which generates most of its sales internationally, said its cookies and gum sales faltered in the U.S. at the start of this year amid broader weakness for the packaged food industry.

"The U.S. consumer is not yet spending," Chief Executive Irene Rosenfeld said, adding that in the second quarter so far, the North American market "continues to be challenging."

"But we expect to see an acceleration in the back half of the year," she said in an interview.

While comparable sales fell 1.9% in North America in the first quarter, Mondelez logged 0.6% growth globally and it continued to improve profitability through cost-cutting. Mondelez shares rose 3% in after-hours trading Tuesday.

On top of the shift toward simpler ingredients, food makers are fighting falling prices for fresh meat and produce, increased competition from store brands and upstarts, and pressure from retailers to offer more discounts. Competitors including Hershey Co. and PepsiCo Inc. last week reported similar duress in the U.S.

Mondelez is counting on new brands like Good Thins and Vea crackers to capitalize on the health and wellness trends. "We see the biggest single opportunity is to continue to shift our portfolio toward wellness and savory brands, in addition to sweet," Ms. Rosenfeld said.

The Deerfield, Ill., company has also doubled down on more indulgent items like an Oreo cookie chocolate bar, a strategy that been successful for competitors including Hostess Brands Inc.

Mondelez has focused in recent years on expanding in emerging markets, where swelling ranks of middle-class consumers are earning enough to buy its products. But geopolitical uncertainty like economic turmoil in Brazil, Britain's vote to leave the European Union, and presidential elections in France have affected what customers around the world are buying.

Overall for the quarter, excluding certain one-time factors, Mondelez reported a profit of 53 cents a share, up 6% from a year earlier excluding foreign currency fluctuations. Revenue fell 0.6% to $6.41 billion. The results beat analyst expectations, based on a survey by Thomson Reuters.

The company said it continues to expect comparable sales growth of at least 1% for 2017.

Write to Annie Gasparro at annie.gasparro@wsj.com

(END) Dow Jones Newswires

May 02, 2017 21:30 ET (01:30 GMT)