It was a good morning for Kellogg
Revenue growth was the standout. Gross margins fell, the company citing "asset write-offs and other costs related to ongoing capacity rationalization and productivity initiatives." Selling, general and administrative expense also rose thanks to increased advertising and promotional expenses. It certainly looks like the company got its marketing and advertising dollar's worth.
Kellogg is hardly a secret; the stock has outperformed the S&P 500 for as long as we have data -- more than 30 years, as it happens. That's earned the stock a full valuation based on the forward guidance provided in today's release, but this is one company that has a history of delivering. (For a look at Kellogg and competitor General Mills
"Key to sustaining our top- and bottom-line growth is improving our underlying profitability and reinvesting in our brands," said Chairman and CEO Carlos Gutierrez. "Our [Q3] profitability was strong enough that we could invest significantly in brand building, absorb up-front costs related to productivity initiatives, and still post solid earnings growth."
That's encouraging language from the leader of a company that has long-term single digit growth as its goal. That Kellogg continues to work to build its brands and improve internal processes, rather than simply grab a few extra points of operating income by cutting costs, recommends the company well. (Improved performance from Keebler would make things look even better.)
Long-term growth for companies of Kellogg's size in mature markets can be difficult barring acquisitions, but the strategy coming out of Battle Creek seems to be working.
Dave Marino-Nachison can be reached at email@example.com.