Why did Kraft Heinz's sales and profits decline in the first quarter of 2025?

Volume/mix fell 5.6 percentage points, which management attributed primarily to a shift in Easter timing of approximately 90 basis points and a decline in Lunchables. Foreign currency reduced net sales by 1.6 percentage points. Adjusted Operating Income was also hurt by increased procurement cost inflation, partly offset by efficiency initiatives and lower selling, general and administrative expenses, primarily from lower variable compensation.

Why did the company lower its 2025 outlook?

CEO Carlos Abrams-Rivera said the operating environment remains volatile and the company is lowering its full-year outlook and expanding the range of expectations to better reflect potential outcomes. Management specifically cited macro-economic pressures such as tariffs and inflation.

How much higher is the effective tax rate expected to be in 2025?

The company expects an effective tax rate on Adjusted EPS of approximately 26%, which reflects an approximate $0.23 headwind year-over-year. The increase is primarily driven by several countries enacting global minimum tax regulations, partially offset by the annual benefit from the transfer of certain business operations completed in the fourth quarter of 2024.

What drove the drop in operating cash flow even though Free Cash Flow rose?

Net cash provided by operating activities was $0.7 billion, down 6.6%, mainly because of higher cash outflows for inventories, largely related to stock rebuilding partly due to the shift in Easter timing, along with lower Adjusted Operating Income. Free Cash Flow rose 1.0% to $0.5 billion because capital expenditures decreased year-over-year.

How is the company returning capital to shareholders?

Year to date, Kraft Heinz paid $477 million in cash dividends and repurchased $225 million of common stock, including $200 million under its publicly announced program and $25 million to offset dilution from equity-based compensation. The company had approximately $1.7 billion of remaining authorization under the public repurchase program as of March 29, 2025.

KHC 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed April 29, 2025. Cited figures are marked; the original filing is the authoritative source.

The Kraft Heinz Company reported first-quarter 2025 results for the period ended March 29, 2025.

Net sales decreased 6.4% to $5,999 million^a, including a 1.6 percentage point negative impact from foreign currency, while Organic Net Sales decreased 4.7%. Operating income fell 8.1% to $1,196 million and Adjusted Operating Income decreased 5.2% to $1,199 million. Diluted EPS was $0.59, down 10.6%, and Adjusted EPS was $0.62, down 10.1%.

Management attributed the volume/mix decline of 5.6 percentage points to a shift in Easter timing and lower Lunchables sales, and noted that higher pricing was taken in certain categories, primarily coffee, to offset input costs. Cash generation was mixed. Net cash provided by operating activities was $0.7 billion^b, down 6.6%, driven mainly by higher inventory outflows tied to stock rebuilding, while Free Cash Flow was $0.5 billion, up 1.0%.

The company paid $477 million^c in dividends and repurchased $225 million of common stock during the period, and had approximately $1.7 billion remaining under its publicly announced repurchase authorization. Balance sheet data show long-term debt rising to $20,925 million from $19,215 million at year-end 2024, and cash and cash equivalents increasing to $2,113 million. For fiscal 2025, the company now expects Organic Net Sales to decline 1.5% to 3.5%, Constant Currency Adjusted Operating Income to decline 5% to 10%, and Adjusted EPS in the range of $2.51 to $2.67.

Management described lowering its full-year outlook and widening the range of expectations, citing tariffs, inflation and an uncertain operating environment. The company also expects an effective tax rate on Adjusted EPS of approximately 26%^d, reflecting global minimum tax regulations.

02—Key points

Key Highlights

Net sales fell 6.4% to $5,999 million; Organic Net Sales decreased 4.7%, with volume/mix down 5.6 percentage points.
Operating income declined 8.1% to $1,196 million; Adjusted Operating Income decreased 5.2% to $1,199 million.
Diluted EPS was $0.59, down 10.6%; Adjusted EPS was $0.62, down 10.1%.
Full-year 2025 outlook was lowered: Organic Net Sales down 1.5% to 3.5%, and Adjusted EPS of $2.51 to $2.67.
Operating cash flow was $0.7 billion (down 6.6%) and Free Cash Flow was $0.5 billion (up 1.0%), with inventory build weighing on operating cash flow.
Returned $477 million in dividends and repurchased $225 million of stock in the first quarter; about $1.7 billion remains under the repurchase program.
Long-term debt increased to $20,925 million from $19,215 million at year-end 2024, after $1,620 million of new debt issuance.

03—Questions

Frequently Asked Questions

Why did Kraft Heinz's sales and profits decline in the first quarter of 2025?
Volume/mix fell 5.6 percentage points, which management attributed primarily to a shift in Easter timing of approximately 90 basis points and a decline in Lunchables. Foreign currency reduced net sales by 1.6 percentage points. Adjusted Operating Income was also hurt by increased procurement cost inflation, partly offset by efficiency initiatives and lower selling, general and administrative expenses, primarily from lower variable compensation.
Why did the company lower its 2025 outlook?
CEO Carlos Abrams-Rivera said the operating environment remains volatile and the company is lowering its full-year outlook and expanding the range of expectations to better reflect potential outcomes. Management specifically cited macro-economic pressures such as tariffs and inflation.
How much higher is the effective tax rate expected to be in 2025?
The company expects an effective tax rate on Adjusted EPS of approximately 26%, which reflects an approximate $0.23 headwind year-over-year. The increase is primarily driven by several countries enacting global minimum tax regulations, partially offset by the annual benefit from the transfer of certain business operations completed in the fourth quarter of 2024.
What drove the drop in operating cash flow even though Free Cash Flow rose?
Net cash provided by operating activities was $0.7 billion, down 6.6%, mainly because of higher cash outflows for inventories, largely related to stock rebuilding partly due to the shift in Easter timing, along with lower Adjusted Operating Income. Free Cash Flow rose 1.0% to $0.5 billion because capital expenditures decreased year-over-year.
How is the company returning capital to shareholders?
Year to date, Kraft Heinz paid $477 million in cash dividends and repurchased $225 million of common stock, including $200 million under its publicly announced program and $25 million to offset dilution from equity-based compensation. The company had approximately $1.7 billion of remaining authorization under the public repurchase program as of March 29, 2025.

04—Continue

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