Improving Sales Lift Kellogg Shares -- Update

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.

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% Tuesday.

"Across the globe, I see more opportunities than I do challenges," said Chief Executive Steven Cahillane, who joined the company about a month ago.

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," Mr. Cahillane said. "This is not a company that is sitting on its hands."

Kellogg also is moving to a less-costly method of delivering its snacks to stores, a process that damped sales. But the reductions in the workforce, warehousing leases and other overhead costs are making the business more profitable. Kellogg's comparable operating profit rose 18% in the quarter.

Kellogg also is reformulating the recipes for some brands to include more natural ingredients. Executives said they remain confident cereal sales will improve as healthful 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 a share from 96 cents a share. Analysts polled by Thomson Reuters expected per-share earnings of 94 cents on $3.21 billion in sales.

Write to Annie Gasparro at annie.gasparro@wsj.com and Imani Moise at imani.moise@wsj.com

(END) Dow Jones Newswires

October 31, 2017 13:03 ET (17:03 GMT)