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Kraft Heinz beats profit estimates, plans to boost marketing; shares surgeBy Aishwarya Venugopal and Richa Naidu
(Reuters) - Kraft Heinz Co <KHC.O> will spend more on marketing for key brands, widely thought to have been neglected after reporting on Thursday, that lower costs helped it beat third-quarter profit expectations, sending shares up 13% in midday trading.
The company, whose biggest investor is billionaire Warren Buffett's Berkshire Hathaway <BRKa.N>, has reported 13 quarters of lackluster sales amid changing consumer tastes and competition from
private label brands owned by Walmart <WMT.N>, Costco <COST.O> and Kroger <KR.N>.
Newly appointed Chief Executive Miguel Patricio, who will outline a detailed plan after a strategic review of the business in 2020, said Kraft Heinz would now
direct more marketing funds toward its flagship brands. The company, whose major brands include Heinz ketchup and Velveeta cheese, also said it plans to
halve the number of project launches planned for 2020.Shares of Chicago-based Kraft Heinz were up 13% at $32.23 in midday trading. Earnings excluding items fell 9.2% to 69 cents per share, but handily beat the 54 cents expected by analysts, according to IBES data from Refinitiv.
Kraft Heinz's earnings beat comes after a rough year that saw it slash dividends and scrap its full-year forecast after taking two major writedowns - one in February of $15.4 billion and another in August of $1.22 billion. The company's procurement practices are also under investigation by the U.S. Securities and Exchange Commission.
The stock has tumbled about 40% since the company disclosed the probe and its first writedown in February.
Net sales fell nearly 5% to $6.08 billion, missing analysts' estimates of $6.13 billion. The company said it expects fourth-quarter sales and EBITDA to be "generally similar" to those of the third quarter. Fourth-quarter earnings are expected to take a hit of up to 10 cents per share.
Expenses sank nearly 25% to $767 million in the third quarter ended Sept. 28 as supply chain cost inflation slowed compared to the first half of the year. The company raised product prices by 1% while sales volume fell 2.1 percentage points.
Source: Reuters
https://finance.yahoo.com/news/kraft-he ... 45475.html
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