Kraft Heinz Top Line Hit by Declining U.S. Sales

By Ezequiel Minaya Features Dow Jones Newswires

Kraft Heinz Co. stumbled out of the gate this year, posting weaker-than-expected first-quarter results as cost-cutting couldn't offset slumping sales in North America and Europe.

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Domestic sales, which make up some roughly 70% of the top line, slipped 3.5% to $4.55 billion. Sales in Canada fell 12.2% to $443 million, while currency impacts in Europe stoked a 6.8% slide to $543 million.

"Although our top line results in the first quarter reflect a slow start to the year, we remain on track with our key initiatives," said Kraft Heinz Chief Executive Bernardo Hees.

The lone bright spot was the company's so-called rest-of-the-world segment, which registered a 7.5% increase in revenue.

Shares of the company fell 3% to $86.50 in after-hours trading.

Kraft Heinz, like many packaged food makers, has grappled with U.S. consumers' shift toward natural, organic foods. A yearslong sales slump in the industry has been exacerbated recently by increased competition from store brands and trendy upstarts, as well as pressure from retailers to offer more discounts amid a long stretch of falling food prices.

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Kraft Heinz has responded by removing artificial colors from its iconic mac-and-cheese, while also coming out with new products such as Philadelphia cream cheese snack packs with bagel chips.

Kraft Heinz's comparable revenue in the quarter declined by 2.7%, reflecting a trend among rivals.

The company has weathered shifting consumer tastes by cutting costs. For the latest quarter selling, general and administrative expenses dropped 13% to $750 million.

Kraft Heinz's strategy is being driven by 3G Capital Partners LP, which alongside Berkshire Hathaway Inc. controls a majority of the company.

The private-equity firm has a reputation for swift layoffs and scrutinizing even the most minor costs using the zero-base budgeting philosophy that calls for departments to justify every expense anew each year.

For the latest quarter, the company earned profit of $893 million, or 73 cents a share, down from $896 million and 73 cents, respectively, a year ago. Stripping out certain items, adjusted earnings were 84 cents up from 73 cents a year earlier.

Analysts surveyed by Thomson Reuters had expected adjusted earnings of 86 cents on $6.45 billion in revenue.

Annie Gasparro contributed to this article.

Write to Ezequiel Minaya at ezequiel.minaya@wsj.com

(END) Dow Jones Newswires

May 03, 2017 17:23 ET (21:23 GMT)