Kraft Heinz Reports 6.4% Decline in Net Sales, Raised Coffee Prices to Mitigate Higher Input Costs
CoffeeNetwork (New York) - The Kraft Heinz Company (Nasdaq: KHC) (“Kraft Heinz” or the “Company”) today reported financial results for the first quarter of 2025.
“In today’s uncertain times, we are committed to controlling the controllables and making the necessary investments to deliver quality, taste, and value to our consumers through our beloved brands,” said Kraft Heinz CEO Carlos Abrams-Rivera. “This quarter, we delivered results in line with our top line expectations despite growing market pressures. We are encouraged by these results, and we will build on the progress we have made to drive consistent growth and profitability.
“I believe our strong balance sheet, scale, and proven ability to generate efficiencies will help us navigate today's challenges. We’re closely monitoring the potential impacts from macro-economic pressures such as tariffs and inflation, and we are dedicated to increasing investments to drive product and brand superiority to deliver more value for our consumers.”
Abrams-Rivera continued, “As the operating environment remains volatile, we are lowering our full year outlook and expanding the range of our expectations to better reflect potential outcomes. We are not losing sight of our long-term strategy and remain committed to delivering value to our stockholders.”
Net sales decreased 6.4 percent versus the year-ago period to $6.0 billion, including a negative 1.6 percentage point impact from foreign currency and a negative 0.1 percentage point impact from divestitures. Organic Net Sales(1) decreased 4.7 percent versus the prior year period. Price increased 0.9 percentage points versus the prior year period, with increases in the North America and Emerging Markets segments partially offset by lower price in International Developed Markets. Higher pricing was taken in certain categories to mitigate higher input costs, primarily in coffee. Volume/mix declined 5.6 percentage points versus the prior year period, with declines in each reportable segment. Unfavorable volume/mix was primarily driven by a shift in Easter timing of approximately 90 basis points and a decline in Lunchables.
Operating Income decreased 8.1 percent versus the year-ago period to $1.2 billion, primarily driven by the factors noted in Adjusted Operating Income, in addition to unfavorable changes in unrealized losses/(gains) on commodity hedges. Adjusted Operating Income(1) decreased 5.2 percent versus the year-ago period to $1.2 billion, primarily driven by unfavorable volume/mix which includes the impact of Easter, increased procurement cost inflation which was partially offset by our efficiency initiatives, and an unfavorable impact from foreign currency (0.8 pp). These impacts were partially offset by decreased selling, general and administrative expenses, primarily due to lower variable compensation expense, and higher pricing.
Diluted EPS decreased 10.6 percent versus the prior year period to $0.59, primarily driven by lower operating income and higher income tax expense due to a less favorable geographic mix of pre-tax income in various non-U.S. jurisdictions primarily due to the changes made to our corporate entity structure in December 2024. These factors were partially offset by favorable changes in other expense/(income) and fewer shares outstanding. Adjusted EPS(1) was $0.62, down 10.1 percent versus the prior year period, primarily driven by lower Adjusted Operating Income and higher taxes on adjusted earnings, partially offset by favorable changes in other expense/(income) and fewer shares outstanding.
Net cash provided by/(used for) operating activities was $0.7 billion, down 6.6 percent versus the year-ago period. This decrease was primarily driven by higher cash outflows related to inventories, largely related to stock rebuilding for the current year due, in part, to the shift in Easter timing, as well as lower Adjusted Operating Income. These impacts were partially offset by lower cash outflows from variable compensation in the 2025 period compared to the 2024 period. Free Cash Flow(1) was $0.5 billion, up 1.0 percent versus the prior year period, driven by the same net cash provided by/(used for) operating activities discussed above, offset by a decrease in capital expenditures in the current year.
Capital Return: Year to date, the Company paid $477 million in cash dividends and repurchased $225 million of common stock. Of the $225 million in share repurchases, $200 million were repurchased under the Company’s publicly announced share repurchase program and $25 million were purchased to offset the dilutive effect of equity-based compensation. As of March 29, 2025, the Company had remaining authorization to repurchase approximately $1.7 billion of common stock under the publicly announced share repurchase program.
Outlook
For fiscal year 2025, the Company now expects:
Organic Net Sales down 1.5 to down 3.5 percent versus the prior year. The Company expects sequential improvement in Organic Net Sales throughout each quarter in 2025, with a flat to slightly positive contribution from price throughout the year.
Constant Currency Adjusted Operating Income down 5 percent to down 10 percent versus the prior year. This includes the impact of lapping lower variable compensation in 2024, which is an approximate 150 basis point headwind. This also contemplates an Adjusted Gross Profit Margin(1)(2) that is expected to be down 25 to down 75 basis points versus the prior year.
Adjusted EPS in the range of $2.51 to $2.67. The Company expects an effective tax rate on Adjusted EPS to be approximately 26 percent, which reflects an approximate $0.23 cent headwind year-over-year. This increase in the effective tax rate is primarily driven by the impact of several countries enacting the global minimum tax regulations. It is partially offset by the annual go forward benefit related to the transfer of certain business operations completed in the fourth quarter of 2024. Additionally, the Company expects interest expense to be approximately $960 million and other expense/(income) to be approximately ($230) million for the full year. This guidance does not reflect any impact from future potential share repurchases.
Free Cash Flow flat versus the prior year, with Free Cash Flow Conversion of approximately 95 percent. This is driven by working capital efficiencies and lower cash outflows for variable compensation, partially offset by a higher cash tax primarily driven by the impact of several countries enacting the global minimum tax regulations.
Alexis Rubinstein
