Packaged food maker Kellanova, formerly Kellogg, beat third-quarter sales and profit estimates as consumers snapped up its Cheez-It crackers and Pringles snacks despite higher prices.
The recently spun-off WK Kellogg, which focuses on the ready-to-eat cereal business in the US, Canada and the Caribbean, also posted better-than-expected sales, sending its shares up nearly 3% in trading before the bell.
Major packaged food companies like Kraft Heinz, Campbell Soup and Mondelēz have grown margins through prices hikes on their quick-fix meals, snacks and chocolates, but there have been early signs of consumer pushback.
Kellanova, home to brands including Cheez-It crackers and Pringles, recorded a 7.4% decline in overall volumes for the quarter, while WK Kellogg posted a 13.4% fall following double-digit price hikes across their product ranges.
'Short-Term Sugar High'
"Price hikes offer a short-term sugar high that can quickly fade if it pushes shoppers to private labels," said Zak Stambor, a senior analyst with Insider Intelligence, adding that Kellanova would have to be careful about how and when it raises prices.
Kellanova's net sales in North America fell slightly, even as the Europe and Latin America regions posted growth.
"Price elasticities ... rose as financially constrained consumers curbed incremental expenditures," the company said.
In October, Kellogg Company completed the spin-off of its North American cereal business into a new standalone entity called WK Kellogg, and renamed itself Kellanova, in a move to sharpen focus on each division.
Kellanova also posted net sales of $3.94 billion (€3.7 billion) for the quarter, surpassing analysts' average expectations of $3.62 billion (€3.4 billion), according to LSEG data.
Its adjusted profit of $1.03 per share was above estimates of 84 cents.
WK Kellogg Performance
WK Kellogg reported sales of $692 million (€648.4 million) beat expectations of $666.3 million (€624.3 million).
In August, Kellogg said its snacking business Kellanova is expected to report full-year sales between $13.4 billion (€12.2 billion) and $13.6 billion (€12.3 billion) after Kellogg separates into two units at the end of the year.
