Kellogg 3Q Earnings Report Includes News of Restructuring and Job Cuts
Along with its earnings report, which beat Wall Street expectations, the company announced "Project K," an efficiency program that will cost the company 2,200 jobs.
Wall Street may be pleased with the third-quarter earnings report issued Monday by The Kellogg Company (NYSE:K), but company employees are having to digest the news that 7% of their workforce is about to be cut as part of a major restructuring program.
The world's largest producer of breakfast cereals reported 3Q net sales of $3.7 billion, beating analysts' expectations, with net earnings for the quarter of $326 million. The quarter's earnings per share included a cost of about two cents per share in integration costs, linked to Kellogg's acquisition of the Pringles snack brand last year from Procter & Gamble (NYSE:PG), in a $2.7 billion cash-all transaction.
The company says it now expects its full-year reported earnings to be “toward the lower end” of the $3.75 to $3.84 per share range – due in part to “weaker than expected sales in certain of the categories in which the company competes.”
Reuters reports Kellogg's is dealing with increased competition from General Mills (NYSE:GIS) and other cereal manufacturers for market share, as a growing number of consumers turn away from old-school packaged cereals in favor of yogurt, fruit, microwavable breakfast sandwiches and other options for their morning meals. Its snack food lines have also been under pressure.
As part of its earnings report, Kellogg's also announced a four year “efficiency and effectiveness”program, called Project K – meant to focus, in part, on increasing growth in developing and emerging markets worldwide. The company also estimates that, by the end of 2017, the Project K restructuring will cut its global workforce by about 7% – or nearly 2,200 jobs.
In a press statement, Kellogg President and CEO John Bryant said the company was “making the difficult decisions necessary to address structural cost-saving opportunities, which will enable us to increase investment in our core markets and in opportunities for future growth.”
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