When not taking a momentary breather by way of a seven-mile run while listening to Bruce Springsteen, Kellogg CEO Steve Cahillane is driving some rather epic numbers this year at the cereal and snack giant.
With consumers quarantined at home amid the COVID-19 pandemic, Kellogg (K) was the latest big food brand to put up eye-popping quarterly results on Thursday. Cahillane tells Yahoo Finance there is strength right now across the Kellogg portfolio of products, underscoring the shift in consumer behaviors that is proving more sustainable than analysts believed early in the pandemic.
“Consumers obviously are still eating more at home and that elevated demand continues. But inside of that, they're gravitating towards brands that they trust and that provide them comfort that they love. And so you're seeing that in our brands, whether it be Pop Tarts and Eggo waffles, up double digits, we're just selling everything that we could make. Cheez-Its are doing very well and so are ready to eat cereals, such as Frosted Mini Wheats, Special K, and Frosted Flakes.”
Cahillane continued, “I never thought I would be dropping the word pandemic in sentences in such a regular fashion. It's just such an unprecedented time. We have used terms like we are in uncharted waters too loosely in the past because we truly are in uncharted waters now.”
One could easily be excused for doing a double-take when reading Kellogg’s latest earnings release. It resembles more a high-tech company out in Silicon Valley than a packaged food company founded in 1916.
Here’s the company’s quarterly earnings compared to estimates by Bloomberg:
Net Sales: $3.5 billion versus estimates for $3.3 billion
Diluted EPS: $1.24 versus estimates for $0.94
Organic net sales: up 5% (prior: up 1% to 2%)
Adjusted EPS: down 1% (prior: down 3% to 4%)
Organic net sales rose 9.2% from the prior year to $3.6 billion. Adjusted operating profit improved 24.7% from a year ago to $562 million. North America was the clear standout, with sales increasing 1% and operating profit surging by 44% on the back of those aforementioned Pop Tarts and Eggo waffles.
The company lifted its full-year sales and earnings outlooks. Shares of Kellogg rose slightly in Thursday afternoon trading despite the big earnings beat as analysts had some concern on a slower pace of earnings growth in the third and fourth quarters as Kellogg ramps up marketing spending.
Cahillane says the stepped up pace of spending will center on brand marketing and promotions at major retailers. It will also go toward an important product launch.
Taking aim at Beyond Meat and Impossible Foods, Kellogg will debut its new Incogmeato plant-based burger brand later this summer, Cahillane notes.