Kellogg Co. reported a surprise improvement in sales as growth abroad offset continuing trouble in the U.S. for longstanding brands like Special K cereal.
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Kellogg's overall sales rose about 0.6% in the third quarter, and comparable sales fell 0.8%, a narrower year-over-year decline than in the first two quarters of 2017. Profit rose 9.4% per share when adjusted for one-time events, topping analyst expectations and sending Kellogg shares up 5%.
The maker of Pringles, Pop-Tarts and Fruit Loops has struggled for years to keep up with a shift in consumer tastes toward fresher, more natural food. Americans have given up breakfast cereal for Greek-style yogurt and breakfast bars that contain more protein and less sugar.
Slowing sales have sparked a flurry of cost-cutting and acquisitions in the industry. Kellogg recently bought niche protein-bar company Rxbar for $600 million, and said it plans to add more Rxbar products and place them in more stores.
"The entire organization is hungry to get back to growth, and it's open to new ideas," said Chief Executive Steven Cahillane, who joined the company about a month ago. "This is not a company that is sitting on its hands."
Kellogg is also transitioning to a less-costly method of delivering its snacks to stores, a process that dampened sales. But the reductions in the workforce, warehousing leases and other overhead costs are also making the business more profitable. Kellogg's comparable operating profit rose 18% in the quarter.
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Kellogg is also reformulating the recipes for some brands to include more natural ingredients. Executives said they remain confident cereal sales will improve as healthy ingredients are added to adult-focused brands like Special K and Mini-Wheats.
Overall for the third quarter, Kellogg reported a profit of $297 million, up from $292 million a year earlier. Revenue edged up 0.6% to $3.27 billion. On an adjusted basis, earnings rose to $1.05 per share from 96 cents per share. Analysts polled by Thomson Reuters expected earnings of 94 cents a share on $3.21 billion in sales.
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(END) Dow Jones Newswires
October 31, 2017 11:18 ET (15:18 GMT)