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Here's what you need to know before the US markets open.
What to expect in today's market 🕒
Bank Of Montreal Earnings (BMO)
Marvell Technology Inc. Earnings (MRVL)
Kroger Company Earnings (KR)
Samsara Inc. Earnings (IOT)
Asana Inc. Earnings (ASAN)
Breakfast at Kellogg’s
The past several decades have seen a decline in cereal sales at Kellogg (K), the 117-year-old firm that began as a maker of breakfast cereal and is known to be one of the largest food corporations in the world. With consumers becoming more health conscious, the once-dominant company in the industry is currently dealing with a variety of setbacks, including multiple lawsuits regarding the nutritional integrity of its goods.
A walk down memory lane
In Memphis, Tennessee, the food corporation experienced a severe fire in 2021. Later that year, 1,400 employees went on strike to demand more compensation and better benefits. After a three-month strike, the workers finally settled on a new contract in December that gave everyone a $1.10 rise an hour.
On June 21, 2022, the corporation revealed plans to divide into three distinct companies in an effort to spur growth. Snacks, cereal, and plant-based businesses will now be independent entities. The intention behind this move was to focus more on growing the snack business. The two tax-free spin-offs will likely be completed by the end of 2023.
Companies like General Electric, IBM, and Johnson & Johnson have started to split up more quickly than usual, but splits like this are less common for food producers. When Kraft split to form Mondelez in 2012, it was the last in the food industry.
Giant producers of packaged foods including Kellogg, Kraft Heinz Co., Conagra Brands Inc., and Mondelez International Inc. have been hiking prices for months, claiming that the price increases are necessary to cover their own increased expenses for ingredients, shipping, and labour. According to Labor Department data, supermarket prices in the US increased 13% in September compared to the same month last year.
Moving onwards & Upwards?
As demand for more expensive cereals and snacks remains robust in North America despite persistent cost constraints, Kellogg increased its full-year sales and profit expectations. As the company warned that its profit margins would not increase as much as anticipated in the fourth quarter, the shares of the cereal manufacturer were down roughly 6% at the beginning of the month.
Analysts have warned that Kellogg could start to lose market share to less expensive store-brand cereals if household budgets, particularly for lower-income consumers, become further squeezed as a result of persistently rising inflation.
Sales volumes increased in North America for the corporation during the quarter, but decreased internationally due to consumer backlash against price increases in Europe, according to company executives. The third-quarter operating profit of the company decreased by 18% as a result of rising transportation and commodity prices, issues with the supply chain, and the impact of a stronger currency on overseas sales.
In contrast to its previous projection of a rise of 7% to 8%, Kellogg now anticipates that yearly organic net sales will increase by above 10%. The company has adjusted the forecast of profit per share to rise more than 3%, as compared to the prior outlook of over 2% growth. Large investors have recently modified their holdings of the business and analysts have issued an “underperform’ rating for the company.
Kellogg's shares have gained only 10% over the last five years. If their cereals did nothing to boost the health of consumers, their share price has not helped investor health either. It will take a lot more than just splitting businesses for the company to become the Special K in the minds of investors.
Market Reaction
K ended at $72.95, up 0.76%.
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