(Adds details from the conference call, background, shares)
By Shailaja Sharma
July 31 Kellogg Co, the world's largest
maker of breakfast cereal, cut its full-year adjusted sales and
profit forecasts as demand for its Corn Flakes and Special K
cereals continued to wane in the United States, its biggest
Kellogg's shares fell as much as 5 percent in morning
trading after the company also cut its full-year adjusted profit
The company reported its fifth straight decline in quarterly
sales at its U.S. cereal business, which includes Corn Flakes
and Froot Loops, hurt by the rising popularity of other
breakfast items such as yogurt and frozen egg sandwiches.
Special K, the company's low-fat cereal brand, has been hit
as consumers increasingly want a breakfast that is not only
low-fat, but one that is also high on nutrition.
Kellogg, which spends $1.5 billion a year on brand building,
will reposition itself with new advertising to focus on
emphasizing the nutritional value of its cereals, Chief
Executive John Bryant said on a conference call.
"I think we need to change our communication to help people
understand how cereal can better meet their needs at breakfast
than some of the other alternatives."
Kellogg, which has been battling stiff competition from
rivals such as General Mills Inc and cheaper
private-label brands, said U.S. cereal business sales fell 4.9
percent in the second quarter ended June 28.
Net sales in the Kellogg's U.S. snacks business fell 2.7
percent, its fourth decline in the past five quarters. The U.S.
snacks and cereal business together accounted for 46 percent of
the company's revenue in the second quarter.
Hurt by the weakness in the two businesses, the company said
it expects full-year internal net sales to decrease 1-2 percent
compared with its previous forecast of an increase of 1 percent.
Kellogg describes internal sales as sales which exclude
foreign currency translation, acquisitions, dispositions, and
The company also cut its adjusted earnings forecast for the
year ending December to between $3.81 and $3.89 per share from
between $3.89 and $3.97.
The Battle Creek, Michigan-based company's net sales in
North America fell 3.7 percent.
Total net sales fell 0.8 percent to $3.69 billion, missing
the average analyst estimate of $3.71 billion, according to
Thomson Reuters I/B/E/S.
Net income attributable to Kellogg fell 16 percent to $295
million, or 82 cents per share. Excluding items, it earned $1.02
per share, in line with the average analyst estimate.
Kellogg's share were down 5 percent at $60.53 in late
morning trading. The stock was the biggest percentage loser on
the Dow Jones U.S. food producers index, which was
down 1.5 percent.
(Editing by Robin Paxton and Savio D'Souza)