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Kraft Heinz has cut its 2025 outlook across a range of metrics to factor in the potential uplift on input-cost inflation from tariffs.
Consumer goods analysts wrote today (29 April) that the downgrades to the organic growth, adjusted operating income and adjusted EPS outlooks was not unexpected but the Lunchables snacks maker still delivered across-the-board negative results in the first quarter.
The size of the cut in constant currency adjusted operating income was also quite hefty, to minus 5-10% compared to the guidance provided in February for a decline of 1-4%.
Organic sales are now expected to be down 1.5% to 3.5% versus the prior outlook for flat to down 2.5%. Adjusted EPS is anticipated to come in at $2.51 to $2.67, from $2.63 to $2.74 previously. EPS rose 2.7% to $3.06 in the 2024 fiscal year.
CEO Carlos Abrams-Rivera said today that Kraft Heinz is “closely monitoring the implications from market tensions” such as inflation and tariffs on consumers and has adjusted the outlook accordingly.
“Our revised outlook contemplates incremental costs from inflation, including the impact of tariffs and new regulations, as well as the impact on elasticities,” the CEO said in his prepared remarks.
The Oscar Mayer brand owner is now building in an additional 150 to 200 basis points of input-cost inflation to the equation after anticipating about 3% at the start of the year. Elevated coffee prices were another factor on top of tariffs.
“Our lower expectations contemplate increased costs of doing business, including elevated inflation and tariffs,” CFO Andre Maciel told analysts on a follow-up call with respect to the cut in the operating income outlook.
“The wider range reflects a larger degree of uncertainty given the underlying volatility and unpredictability of macro-economic dynamics, as well as a changing policy landscape. It also provides us with the necessary flexibility to dial-in on investments as deemed appropriate.”
Maciel explained the adjustment in the organic sales guidance was “primarily driven by worsening consumer sentiment and changes in volume elasticity”.
Muted quarter
The consumer environment was reflected in the first-quarter results. In the three months to 29 March, group net sales dropped 6.4% on a reported basis and 4.7% in organic terms to just shy of $7bn.
In Kraft Heinz’s largest sales division of North America, sales dropped 7% and 6.5% in reported and organic terms, respectively to $4.49bn. Volume/mix declined 7.1% with pricing a positive 0.6%.
Similarly in the international business, sales were down 4.4% and 1.7% across those metrics at $817m, with volume/mix a negative 1.5% but with price decreases of 0.2% in the quarter.