The Kraft Heinz Company (KHC) Q1 2025 Prepared Remarks earnings summary

Executive summary

• Organic net sales declined 4.7% year-over-year, with total net sales down 6.4% to $6.0 billion, reflecting challenging consumer sentiment and market pressures.

• Adjusted operating income fell 5.2% to $1.2 billion, and adjusted EPS dropped 10.1% to $0.62, mainly due to higher tax rates and lower sales volume.

• Free cash flow rose 1.0% to $482 million, with conversion improving to 65%, and strong capital returns to shareholders year-to-date.

• The company maintained a leverage ratio near 3x and returned nearly $900 million to stockholders, including dividends and share repurchases.

• Full-year 2025 outlook was lowered due to ongoing macroeconomic volatility, inflation, tariffs, and weak consumer sentiment.

Financial highlights

• Adjusted gross profit margin contracted by 10 basis points to 34.4% year-over-year.

• Adjusted operating income was $1.2 billion, down 5.2% year-over-year; adjusted EPS was $0.62, down 10.1%.

• Free cash flow for the quarter was $482 million, up 1% year-over-year.

• Gross efficiencies of nearly $150 million offset some commodity inflation pressure.

• Net income attributable to common shareholders was $712 million, down 11.1% year-over-year.

Outlook and guidance

• Fiscal 2025 organic net sales expected to decline 1.5% to 3.5% year-over-year, with sequential improvement each quarter.

• Constant currency adjusted operating income projected to decrease 5% to 10% year-over-year.

• Adjusted EPS guidance set at $2.51 to $2.67, with a 26% effective tax rate.

• Free cash flow conversion expected at approximately 95% for 2025.

• Marketing spend to increase as a percentage of net sales; inflation expected at 5% to 7%.