Higher prices for products like Fruit Loops and Eggo Waffles helped give Kellogg some confidence it will be able to manage cost inflation, supply chain bottlenecks and the lingering impact of its recent labour strike.
Steve Cahillane, chief executive, conceded that business conditions would remain “challenging” in 2022, but Kellogg expected organic net sales growth of 3 per cent and adjusted earnings per share growth of 1-2 per cent.
That was better than Wall Street forecast and, in addition to topping analysts’ revenue and profit expectations for the fourth quarter, helped push Kellogg shares up more than 3 per cent in lunchtime trading on Thursday.
Against a broader backdrop of surging inflation in the US and elsewhere, the company has raised prices for its products, helping moderate cost inflation associated with materials like corn, oil, and packaging.
Executives said during an earnings call on Thursday they planned to deal with inflation in 2022, which they expect to run at double-digit rates, through productivity and revenue growth management initiatives.
The price increases, as well as strong momentum in international markets, helped offset the impact on sales of a three-month-long strike late last year involving about 1,400 Kellogg workers across four breakfast cereal plants in the US.
Cahillane said he expects the impact of the strike to affect sales in the first and second quarter of 2022 as the company rebuilds inventories.
Owing to the impact of the strike, Kellogg’s fourth quarter net sales fell 1.3 per cent from a year ago to $3.42bn, but that still beat analyst estimates for $3.39bn. Quarterly earnings of $1.26 a share more than doubled from a year earlier and surpassed Wall Street’s estimate of $0.79 a share.