Kraft Heinz misses sales estimates as U.S. demand weakens

(Reuters) - Kraft Heinz Co KHC.O marginally missed Wall Street sales estimates in the third quarter and warned it would be hampered in the fourth by many U.S. consumers working through emergency hurricane stores of its tinned goods.

FILE PHOTO: Heinz tomato Ketchup is show on display during a preview of a new Walmart Super Center prior to its opening in Compton, California, U.S., January 10, 2017. REUTERS/Mike Blake/File Photo

Excluding items, net profit at North America’s third-largest food and beverage company, came in at 83 cents per share, marginally better than a consensus of 82 cents, according to Thomson Reuters I/B/E/S.

The 0.3 percent dip in U.S. revenue, however, compared to rises for other packaged food companies and came at a time when the firm is struggling with the shift by consumers and retailers away from its processed food toward fresh produce.

Shares of the company, which is backed by billionaire-investor Warren Buffett and private equity firm 3G Capital, fell 1.5 percent in after-market trading.

“There’s no question that the retail environment, particularly in the United States, will remain both dynamic and challenging,” Chief Executive Bernardo Hees said.

The company said organic U.S. sales growth would take another 30 basis point hit from the loading of pantries in southern states in the third quarter in advance of hurricanes Irma, Harvey and Maria.

It blamed the dip in the third quarter - the sixth straight quarterly fall in sales - in part on problems with shipments of cold cuts that would also affect sales in the fourth quarter.

Other packaged food companies have experienced a revival in North American sales this quarter with Mondelez MDLZ.O reporting a 1.3 percent rise in revenue while Hershey HSY.N posted a 1.6 percent rise.

Like other processed packaged food makers, Kraft Heinz has been grappling with an increasing number of Americans preferring healthier, non-processed foods, rather than preservative-heavy packaged foods.

To compound their woes, the major customers of traditional packaged food manufacturers, such as grocer Kroger KR.N, are shifting shelf space to higher-margin private-label brands.

The company said it would make efforts in partnering with retailers to attract consumers from non-traditional channels including e-commerce.

Kraft, which at the start of this year targetted a $1.7 billion cut in costs by the end of 2017, said selling, general and administrative expenses fell about 19 percent to $653 million in the reported quarter.

JP Morgan analysts were disappointed by the results.

“In sum, the numbers were a bit less robust than what we had hoped for, and margins were softer than what we had modeled in all segments,” they said in a note on the results.

Reporting by Uday Sampath in Bengaluru; Editing by Savio D’Souza and Shounak Dasgupta