Kraft Heinz puts separation plans on hold so it can focus on fixing these problems

By Tomi Kilgore

Stock drops as North America sales continue to fall, even as prices remained flat, amid weakness in coffee, cold cuts, bacon and Ore-Ida products

Kraft Heinz's stock falls as sales again disappointed, particularly in North America.

Shares of Kraft Heinz dropped in early Wednesday trading after the food and beverage giant reported disappointing fourth-quarter sales and provided a full-year profit outlook well below Wall Street forecasts.

The company (KHC) also said it was putting its plan to separate its grocery business on hold, as it focuses on boosting sales and profitability.

Kraft Heinz, known for Heinz Ketchup, Kraft Mac and Cheese, Jell-O and Kool-Aid brands, reported a year-over-year sales decline for the ninth straight quarter, as sales in North America offset continued growth in overseas markets.

The weakness in North America came even as prices stayed flat, with volume falling more than 5 percentage points amid weakness in products such as coffee, cold cuts, bacon and Ore-Ida frozen potatoes.

The stock dropped 5.9% in premarket trading, putting it on track for the worst one-day postearnings performance in two years.

Net sales for the quarter to Dec. 27 were down 3.4% from a year ago to $6.35 billion - just below the average analyst sales estimate compiled by FactSet of $6.37 billion. In addition to the ninth straight year-over-year decline in sales, it marked the 10th miss over the past 11 quarters.

The problem was North America, where sales were down 5.4% to $4.7 billion. That was at least the 10th straight quarter of declines, based on available FactSet data back to October 2022.

In comparison, sales in international developed markets increased 1.8% to $930 million and emerging-market sales were up 4.3% to $724 million, with both regions posting a third straight quarter of growth.

CEO Steve Cahillane, who took charge of the company this year to help usher in the business separation, said that after looking at the company's challenges and opportunities, his first priority is to return the business to profitable growth, with "all resources" working toward that goal.

"As a result, we believe it is prudent to pause work related to the separation and we will no longer incur related dis-synergies this year," Cahillane said, referring to the businesses performing worse together than on their own.

Net income dropped 70% to $651 million, hurt by charges from lowered valuation of assets, higher commodity and manufacturing costs and increased advertising expenses.

Excluding nonrecurring items, adjusted earnings per share still fell 20% to 67 cents, but beat the FactSet EPS consensus of 61 cents.

Looking ahead, the company expects 2026 adjusted EPS of $1.98 to $2.10, which is well below the current FactSet consensus of $2.47.

Kraft Heinz shares have dropped 15.8% over the past 12 months through Tuesday, while the State Street Consumer Staples Select Sector SPDR ETF XLP has gained 8.1% and the S&P 500 index SPX has advanced 14.4%.

-Tomi Kilgore

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

02-11-26 0825ET