Easter takes a bite out of Kraft’s first quarter

An expected shift in Easter-related product shipments affected Kraft Foods Group in the first quarter of 2014.



"We continued to make steady progress during the first quarter of this year," said CEO Tony Vernon, who remained positive. "We still have more work to do, but we're confident that our focus on brand renovation, marketing excellence and total cost management will drive the profitable growth that both we and our shareholders expect."



Net revenues in the first quarter declined 3.3% to $4.4 billion. Volume/mix was negatively affected not just by Easter-related shipments shifting to the second quarter of this year but also a normalization of retail customer inventories from higher-than-average levels at the end of 2013.



Earnings per share in the first quarter increased 11.8% to $0.85. The $0.09 increase in EPS versus the prior year included a $0.02 benefit from market-based impacts to post-employment benefit plans as well as a $0.05 favorable change in unrealized gains/losses from hedging activities. Excluding these factors, EPS growth reflected the favorable net impact of discrete tax items versus the prior year.



The company’s cheese business had net revenues of $1 billion, which increased from the prior year primarily due to price increases that more than offset a volume/mix decline caused by later Easter-related shipments versus the prior year.



Net revenues for refrigerated meals were $816 million, flat versus the prior year as continued momentum in Lunchables offset volume softness in cold cuts and bacon due to the shift in Easter-related shipments and retail customer inventory reductions versus year-end levels.



Net revenues for beverages were $674 million. The decline was primarily due to lower pricing reflecting lower green coffee costs versus last year as well as increased merchandising activity behind Capri Sun ready-to-drink beverages.



Net revenues for meals and desserts were $498 million, down from last year due to a combination of the shift in Easter-related shipments, retail customer inventory reductions versus year-end levels and continued weakness in ready-to-eat Jell-O desserts.



Net revenues for enhancers and snack nuts were $503 million, the decline primarily driven by comparisons with Easter-related shipments in the prior year as well as a reduction in retail customer inventory levels during the first quarter this year.



Net revenues for the Canada business were $427 million. The decline was primarily due to a combination of an unfavorable currency impact, comparisons with Easter-related shipments in the prior year and retail customer inventory reductions versus year-end levels.