WK Kellogg (KLG), the company behind household-name cereals such as Frosted Flakes, Special K, and Froot Loops, published its earnings for the second quarter of fiscal 2025 on August 7, 2025. The company reported GAAP earnings per share of $0.09 in Q2 FY2025, well below the analyst consensus of $0.28 (GAAP), and GAAP revenue of $613 million in Q2 2025, missing GAAP revenue estimates by about $9 million. Both GAAP net sales and net income were noticeably lower compared to Q2 2024. Overall, the quarter showed declining sales and profitability on a GAAP basis, larger cash outflows, and the impact of ongoing business restructuring as the company heads toward acquisition by Ferrero.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (GAAP, diluted) | $0.09 | $0.28 | $0.42 | (78.6 %) |
| Revenue (GAAP) | $613 million | $622.13 million | $672 million | (8.8 %) |
| Adjusted EBITDA | $57 million | $83 million | (31.3 %) | |
| Adjusted EBITDA Margin | 9.4 % | 12.4 % | (3.0 pp) | |
| Free Cash Flow | ($108 million) | ($10 million) | n/m |
Source: Analyst estimates for the quarter provided by FactSet.
Business Overview and Key Areas of Focus
WK Kellogg is a major U.S. food company, best known for its ready-to-eat cereal brands. Its top products include Frosted Flakes, Special K, Rice Krispies, and Froot Loops, supported by marketing icons Tony the Tiger and Toucan Sam. The business was recently spun out of Kellanova and operates independently, although it continues to rely on transition and supply agreements with its former parent until October 2025.
The company's main areas of focus are its strong line of brands, smooth navigation of its spin-off from Kellanova, and a major effort to modernize its supply chain. Improving operational efficiency and managing its supply network are seen as essential for long-term cost control and quick response to shifting demands in the U.S. breakfast market. Customer concentration remains a critical point, as a few large retailers, especially Wal-Mart Stores, Inc, account for a large share of sales. In addition, WK Kellogg closely monitors commodity costs and supply chain risks, using hedging and long-term contracts to cushion the impact of price swings in grains and ingredients.
Quarter in Review: Financial Performance and Key Developments
Earnings in Q2 2025 were weaker than expected on both headline (GAAP) and underlying results. GAAP earnings per share dropped to $0.09 in Q2 FY2025, well below the analyst expectation of $0.28 (GAAP), while Reported net sales of $613 million marked an 8.8% decline from a year ago. The main reason for the revenue decline was an 8.1% drop in sales volume, with a small negative shift in pricing and product mix contributing a further 0.7% decrease in organic net sales. There was little impact from foreign currency changes. Organic net sales (non-GAAP) fell by the same percentage as reported.
Profitability eroded notably during the quarter. GAAP net income fell to $8 million from $37 million compared to Q2 2024, while the adjusted EBITDA margin slid to 9.4% from 12.4% in Q2 2024. This margin contraction reflects rising costs, especially in restructuring and business transition, which reached $18 million. Gross margin (GAAP) also declined, with cost of goods sold as a percentage of sales climbed to 72.8% (GAAP)—mainly as a result of weaker sales, offset only partially by lower input costs. The company incurred $8 million in separation and transition costs in the quarter ended June 28, 2025, as it completed its post-spin separation from Kellanova.
Restructuring and modernization of operations drove significant charges during the period. Supply chain modernization is a top strategic priority, with the company investing in plant consolidations and process upgrades, but the associated costs are heavily concentrated in the short term. Restructuring and supply chain realignment expenses totaled $14 million in the quarter and $34 million in the year-to-date period ended June 28, 2025. While management says these moves are vital for long-term competitiveness, the benefits have not yet appeared in improved sales or margins. These costs also pressured free cash flow (non-GAAP), which swung more deeply negative year over year for the year-to-date period.
The announced agreement to be acquired by Ferrero, revealed in July 2025, became the dominant development for the business. Under the terms, Ferrero will acquire WK Kellogg for $23.00 per share in cash. This has led to a suspension of financial guidance for the year and a focus on managing the business pending transaction closing and regulatory clearance. The company will not host an earnings webcast as part of its transition, marking a shift toward a transitional holding pattern until the deal is finalized. The acquisition premium and stock price surge indicate market optimism about the value of the company’s brands and strategic fit within Ferrero’s global business.
Financial Outlook and What to Watch Ahead
Management has suspended forward guidance for fiscal 2025 because of the pending Ferrero acquisition. The company will not host a webcast or provide earnings forecasts at this time.
Investors will be watching for progress in restructuring efforts and integration planning. The company’s continued exposure to retailer concentration, further restructuring expenses, and persistently negative free cash flow are also key considerations until the acquisition is completed.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
