Kellanova Tops Wall Street Estimates

(Reuters) – Packaged food company Kellanova exceeded Wall Street's predictions for third-quarter sales on Thursday, fueled by strong demand for its ready-to-eat breakfast items and snacks, despite escalating prices.

Why It Is Important

The maker of Cheez-It has leveraged its brand strength to gradually increase product prices over the years to enhance its profit margins.

Interestingly, higher prices have not diminished consumer demand for its products, unlike rivals such as Kraft Heinz (NASDAQ:KHC) and Conagra Brands (NYSE:CAG), who reported disappointing sales as customers opted for more affordable alternatives.

Context

In October last year, packaged foods giant Kellogg Company (NYSE:K) spun off its North American cereal business into WK Kellogg and rebranded itself as Kellanova.

In August, the family-owned candy giant Mars announced plans to acquire Kellanova for nearly $36 billion, merging brands like M&M's, Snickers, Pringles, and Pop-Tarts. This move aims to capitalize on ongoing consumer interest in branded snacks amid stagnant growth in the packaged food sector.

Kellanova noted on Thursday that in light of the merger with Mars, it would not provide future sales forecasts.

By the Numbers

A decrease in costs related to transportation, raw materials, and labor has enabled the company to improve its adjusted gross margin to 35% in the third quarter, up from 33.2% a year prior.

Net sales reached $3.23 billion for the three months ending September 28, outperforming analysts' expectations of $3.16 billion, according to data collected by LSEG.

Kellanova reported an adjusted profit of 91 cents per share in the quarter, again surpassing forecasts of 85 cents.