Weakened Consumer Spending Hits Kellanova’s First Quarter
Pringles maker Kellanova (K.N) reported disappointing first-quarter results on Thursday, missing market expectations for net sales as weakened consumer spending in its biggest market, the U.S., weighed heavily on performance. The company noted that inflationary pressures were particularly impactful in the U.S., which continues to face the economic uncertainty caused by President Donald Trump’s sweeping trade policies. Kellanova is forecasting further challenges this year, with weak spending expected to persist across various markets.
Rising Costs and Price Increases Across Markets
In response to rising input costs, Kellanova has been implementing price hikes across its product categories to offset the financial pressures. The company is also preparing contingency plans to manage through the continued global economic uncertainty, signaling that the road ahead may remain rocky. Kellanova’s ongoing price increases reflect broader trends within the food industry, with rivals like Hershey (HSY.N) also flagging the impact of tariffs, estimating expenses between $15 million and $20 million in the current quarter due to increased trade-related costs.
Weak Performance in Key Markets
Sales in the United States, which accounts for approximately 51% of Kellanova’s total business, fell 4% in the first quarter due to persistent weakness in the snacks and frozen foods categories. The company also faced soft demand in Europe and Latin America, particularly for cookies and beverages. This weak performance across key regions contributed to a 3.7% decline in net sales, which fell to $3.08 billion for the three months ending March 29, below the analysts’ consensus estimate of $3.18 billion. Kellanova’s adjusted gross margin also dropped to 34.9% from 35.7% a year ago, further highlighting the challenges faced by the company.
Lower Profit Expectations Amid Economic Challenges
Kellanova’s adjusted profit for the first quarter came in at 90 cents per share, falling short of analysts’ expectations, which had pegged earnings at $1.01 per share. The company’s weaker-than-expected performance reflects broader industry struggles, as inflation and geopolitical tensions continue to drive up costs and reduce consumer spending. As Kellanova continues its acquisition process by snacks giant Mars, it remains to be seen how the company will adapt to the changing economic landscape and what strategies it will employ to recover from this challenging quarter.
