Cereal-maker Kellogg (NYSE:K) reported a dismal third quarter with a 14% dip in earnings due to supply-chain investments. Kellogg based out of Battle Creek, MI reported it earned $290 million, or 80 cents a share, last quarter, compared with a profit of $338 million, or 90 cents a share, a year earlier. Analysts had been calling for earnings per share of 89 cents.
Revenue rose 4.9% to $3.31 billion, but failed to meet the Street’s view of $3.41 billion. Gross margins shrank to 40.8% from 43.4%.
Kellogg slashed its full-year outlook, projecting non-GAAP earnings per share of $3.27 to $3.33, compared with its earlier view of $3.33 to $3.40. Even the more optimistic end of the new range would widely trail expectations from analysts for $3.48.
Internal sales are still expected to rise 4% to 5%, but internal operating profit growth is now seen at just 2% to 4%.
Kellogg reported its North American sales increased 4% last quarter to $2.2 billion, but retail cereal revenue was flat. International revenue climbed 7% to $1.1 billion despite a 2% decrease in European sales.
“We are continuing to rebuild our momentum as a company. The third quarter offered some compelling signs of improvement, particularly top-line growth and in-market performance. Rebuilding momentum takes time, especially in challenging market environments. We increased the levels of investment in our supply chain in the quarter, a process we will continue. This multi-year program will improve the infrastructure and drive reliability and capability,” said John Bryant, Kellogg Company’s president and chief executive officer.
Bryant continued, “We’re making progress in 2011 by strengthening our innovation pipeline and investing in our supply chain. We expect this progress to continue throughout 2012 as we work to invest further in our ability to deliver dependable growth. As always, we are firmly committed to running the business for the long term and will continue to invest in our business in 2012; we believe this is the best way to ensure sustainable momentum.”
Shares of Kellogg were trading down at 50.19, or -7.12% at 10:11 am ET today.
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