Kellogg‘s lowered earnings forecast has led an analyst to warn that the US food group’s challenges in the cereal sector could last longer than expected.
Yesterday, the US cereal giant cut its full-year 2010 earnings target amid a “weaker performance” in some of the US giant’s “core” cereal markets.
Go deeper with GlobalData
“Kellogg’s new guidance range implies that weakness will persist longer than we – and consensus – originally anticipated,” said Sanford Bernstein analyst Alexia Howard said today.
The company’s share price closed down only 0.5% yesterday and Howard suggested that investors may have already anticipated a tough quarter “due to the negative impact from the Eggo waffle plant disruption, the cereal recall over the summer and the aggressive promotional activity from its competitors”.
Nonetheless, Howard argued that Kellogg’s volumes are facing more problems than in the second quarter when the company blamed the recall and the competitive environment in the category.
See Also:
“Anecdotally we understand that the company is now pointing to volume shrinkage as a reason for its disappointing third quarter – specifically, consumers now appear to be reducing product “waste” by buying fewer products.”
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataHowever, Howard said that “on balance” Kellogg’s woes were “temporary”, although the slowdown in the US cereal category in the US and Europe “gives us pause”. She said she believes the company will see a recovery in mid-2011, rather than in the first quarter of 2011, as she had originally expected.
Nonetheless, the analyst warned that Kellogg’s “history of conservatism” suggested that the company could issue 2011 targets that could dismay investors and hit the group’s shares further. “We suspect that guidance for FY11 may also be a disappointment, which could weigh on the stock going into the quarter,” Howard said.
