Kellogg (K) shares fell 8% in morning trading after it lowered its 2011 outlook and issued disappointing 2012 guidance.
The company reported 80 cents of EPS, missing analysts’ expectations by 9 cents. The company also lowered it 2011 earnings guidance to a range of $3.27 to $3.33, although foreign exchange benefits could add an additional 8 cents. That’s below analysts’ expectations for $3.48. The company also sees earnings rising 2% to 4% next year, a disappointing growth rate.
Kellogg says it is investing more in its brands, which will curb profit growth in the near term. The company has had problems with recalls — eggo waffles and cereal were recalled over the past couple of years because of quality issues — and Kellogg is now investing more in quality-control measures.
“Rebuilding momentum takes time, especially in challenging market environments,” said CEO John Bryant. “We increased the levels of investment in our supply chain in the quarter, a process we will continue. This multi-year program will improve the infrastructure and drive reliability and capability.”
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