The Kraft Heinz Company (KHC) Q1 2026 Prepared Remarks earnings summary

Executive summary

• Net sales rose 0.8% year-over-year to $6.0 billion, with organic net sales down 0.4% due to unfavorable volume/mix offsetting higher pricing in all segments.

• Q1 results exceeded expectations, with strong free cash flow and early market share gains from initial investments, especially in U.S. taste elevation and international markets.

• U.S. performance declined but was offset by growth in emerging markets and Canada.

• Diluted EPS increased 13.6% to $0.67, while adjusted EPS declined 6.5% to $0.58, reflecting lower adjusted operating income.

• The company reaffirmed its 2026 guidance and is maintaining flexibility for further investment.

Financial highlights

• Adjusted gross profit margin was 34.1%, down 30 basis points year-over-year due to inflation, partially offset by productivity gains.

• Adjusted operating income declined 11.8% to $1.06 billion, primarily from increased costs and unfavorable volume/mix.

• Free cash flow increased 59% to $0.8 billion, driven by working capital improvements; free cash flow conversion reached 111%.

• Net income attributable to common shareholders grew 12.1% year-over-year to $798 million.

• Operating income fell 4.3% year-over-year, mainly due to higher advertising, inflationary manufacturing/logistics costs, separation costs, and increased restructuring costs.

Outlook and guidance

• Full-year 2026 outlook reaffirmed: organic net sales expected to decline 1.5% to 3.5% year-over-year, with a 100 basis point SNAP headwind.

• Adjusted gross profit margin expected to be down 75 to 25 basis points year-over-year.

• Adjusted operating income projected to decline 18% to 14%; adjusted EPS expected between $1.98 and $2.10.

• Free cash flow conversion targeted at approximately 100%.

• Capital expenditures for 2026 are projected at approximately $900 million, focused on maintenance, growth, and technology investments.