October 21, 2010 / 12:26 PM / 9 years ago

UPDATE 2-Kellogg cuts 2010 profit view; shares fall

* Lowers 2010 view on weak cereal sales, competition

* Sees Q3 EPS, sales down 4 pct, or 2 pct ex-forex

* Shares down 2 pct in premarket trading

* Will report third-quarter earnings on Nov. 2. (Revises first sentence, adds CEO and analyst comment, background on General Mills)

NEW YORK, Oct 21 (Reuters) - Kellogg Co (K.N) cut its 2010 earnings outlook on Thursday, as a product recall and price competition hurt cereal sales, sending shares down 2 percent in premarket trade.

The maker of Kellogg’s cereals, Keebler cookies and Eggo waffles said it expects 2010 earnings per share to grow 4 to 5 percent, excluding the impact of foreign currency exchange rates. It expects internal net sales to fall 1 percent.

Kellogg already lowered its 2010 forecast in July, predicting full-year earnings growth of 8 to 10 percent, down from a prior view of growth of 11 percent to 13 percent.

For the third quarter, Kellogg said it estimates that net sales and earnings fell 4 percent, or 2 percent excluding the currency impact. It is expected to report third-quarter earnings on Nov. 2.

“2010 has clearly been a challenging year, and we are disappointed with our third-quarter performance,” said Kellogg Chief Executive David Mackay.

By contrast, rival General Mills Inc (GIS.N) reported last month that sales rose 1.5 percent, helped by a 4 percent increase for cereal. [ID:nN2299767]

“Kellogg was negatively impacted from their own recall,” said Morningstar analyst Erin Swanson, referring to when the world’s largest cereal maker voluntarily pulled millions of cereal boxes from store shelves across the country in June due to some foul smells. [ID:nN25162877]

“It seemed like what General Mills talked about last month might have started to indicate that things were improving in that segment but obviously that’s not an across-the-board thing,” she added.

Kellogg shares fell about 2 percent to $48.96 in premarket trade, from their close on Wednesday at $50.02 on the New York Stock Exchange. (Reporting by Martinne Geller, editing by Matthew Lewis)

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