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Kraft Heinz Raises Its Outlook on Strong Demand

By Demitri Kalogeropoulos – Apr 7, 2020 at 7:21AM

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The fiscal year is off to a positive start as consumers stock up on prepare-at-home food.

The COVID-19 pandemic is harming parts of Kraft Heinz's (KHC -2.82%) business, but the overall impact on demand has been positive. The consumer foods giant said on Monday that sales growth has accelerated in recent weeks, enough to lift its outlook for the fiscal first quarter.

Kraft noted a significant decline in sales to its foodservice partners, which include restaurant chains that are seeing sharply reduced customer traffic thanks to social distancing efforts. But its core retailing segment is more than making up for that slump.

In fact, organic sales are on track to rise about 6% in the current quarter. Executives' last forecast, before the pandemic reorganized consumer food demand, called for sales to fall slightly as they have for most of the past year. "Our strong execution in the face of this crisis," CEO Miguel Patricio said in a press release, "reflects the exceptional progress our people have been making" toward transforming the business after a disappointing fiscal 2019.

A bowl of macaroni and cheese.

Image source: Getty Images.

Kraft Heinz said the faster sales growth won't immediately translate into accelerated earnings gains because the company is seeing extra costs associated with ramping up production and distribution to meet unprecedented demand levels for prepare-at-home food products. The company should have a more detailed profit outlook when it announces first-quarter results on April 30.

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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