Inflation Eats at Kellogg's Profits, but Ongoing Strategic Shift Should Lead to Long-Term Gains
On the surface, Kellogg’s second-quarter results, 0.4% organic sales shortfall and 90 basis points of adjusted operating margin contraction to 14.2%, could be viewed as merely a reflection of the challenging competitive landscape. However, parsing through the noise, we posit that the merits of its strategic endeavor to move away from direct-store distribution in favor of warehouse delivery are starting to surface. In this vein, management repeatedly referenced qualitatively the broad-based sales...Kellogg is engaged in the manufacture and marketing of ready-to-eat cereal and convenience foods. The company's principal products are snacks, such as crackers, savory snacks, toaster pastries, cereal bars, granola bars and bites; and convenience foods, such as, ready-to-eat cereals, frozen waffles, veggie foods and noodles. The company's snacks brands are marketed under brands such as Kellogg's, Cheez-It, Pringles, Austin, Parati, and RXBAR. The company's cereals and cereal bars are generally marketed under the Kellogg's name, with some under the Kashi and Bear Naked brands. The company's frozen foods are marketed under the Eggo and Morningstar Farms brands.
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