Kraft Heinz reported falling third-quarter sales, profit and volumes, but raised the low end of its full-year organic sales outlook. The company also lifted its adjusted EPS range while leaving its sharply lower adjusted operating income forecast unchanged.
- Third-quarter net sales fell 2.0% to US$6.115 billion
- Adjusted EPS declined 13.1% to US$0.53
- North American organic sales fell 3.2%, while emerging markets grew 15.6%
- Full-year organic sales outlook improved to a decline of 0.5% to 1.25%
- Adjusted EPS outlook increased to US$2.07-US$2.13
The Kraft Heinz Company (NYSE:KHC) delivered a weaker third quarter, with net sales down 2.0% to US$6.115 billion and adjusted EPS falling 13.1% to US$0.53. Management nevertheless raised the bottom end of its full-year organic sales outlook, pointing to a narrower expected decline even as profitability remains under pressure.
North American volumes remain the central drag
Organic net sales fell 1.1% across the group, with volume and mix down 1.1 percentage points while pricing was flat. North America, the company’s largest segment, recorded a 3.2% organic sales decline as meats, sauces and refreshment beverages weakened. Kraft Heinz also cited an approximate 80 basis point headwind from inventory being pulled forward into the second quarter.
Emerging Markets provided the clearest counterweight, with organic sales up 15.6% and volume and mix rising 8.4 percentage points. Europe and Pacific Developed Markets remained soft, posting a 1.3% organic sales decline. The regional split leaves the stated US turnaround plan carrying much of the burden for any improvement in the group’s overall trajectory.
Cost pressure cuts into adjusted earnings
Reported operating income dropped 14.6% to US$875 million, while adjusted operating income fell 15.2% to US$939 million. Kraft Heinz attributed the decline to inflation in procurement and logistics, higher variable compensation, weaker volume and mix, increased advertising spending and higher impairment losses, which more than offset efficiency initiatives.
GAAP diluted EPS was US$0.46, down from US$0.52. For the first nine months, the company reported a GAAP net loss of US$4.125 billion, including US$7.437 billion of impairment losses; adjusted EPS for the period was US$1.67, down from US$1.92. Adjusted gross profit margin also slipped to 31.9% in the quarter from 32.3% a year earlier, showing that the pressure was not limited to below-the-line items.
Sales guidance improves while operating profit forecast stays weak
Kraft Heinz now expects full-year organic net sales to decline between 0.5% and 1.25%, narrowing the previous range of a 0.5% to 2.0% decline at the weaker end. Its adjusted EPS outlook rose to US$2.07-US$2.13 from US$2.03-US$2.09. The company kept its constant-currency adjusted operating income forecast unchanged at a 16% to 18% decline, with approximately US$700 million of incremental investment versus 2025 and a 500 basis point headwind from lower incentive compensation in the prior-year comparison.
Cash generation remained substantial but softer: nine-month operating cash flow was US$2.960 billion and free cash flow was US$2.361 billion, down 4.1% and 5.2% respectively. Kraft Heinz paid US$1.423 billion in dividends and did not repurchase shares under its publicly announced programme. The next test is whether the improved sales range can be delivered without further sacrificing margin, particularly while North American volume remains negative and input-cost pressure persists.
Bottom Line?
The raised sales floor offers a modest improvement, but the unchanged 16% to 18% adjusted operating income decline keeps execution and margin recovery as the more important tests.
Questions in the middle?
- Can the North American business reverse its volume and mix decline without heavier promotional or advertising investment?
- Will procurement and logistics inflation ease enough to stabilise adjusted gross profit margin?
- Can the improved adjusted EPS range be achieved while adjusted operating income remains sharply below the prior year?