Dean Foods, the nation's largest processor and distributor of milk and dairy products, said on Tuesday it would cut 600 to 700 jobs and lowered its earnings outlook as it struggles with higher dairy costs and softening sales.
Dean , whose brands include Land O'Lakes creamers and Silk soy milk, said sales have been hurt as consumers react to the price increases the company must implement to offset what it called all-time high dairy costs. The company also blamed a shift from branded products to private label and an oversupply of organic milk.
Dallas-based Dean said it now expects earnings per share of about 15 cents in the third quarter and about $1.25 for the full year. In August it said third-quarter profit could range from 24 cents to 28 cents and that it "may be able to hit the low end" of its prior guidance of $1.52 to $1.58 per share for the full year.
"While we had expected strong growth in milk supply to lead to lower conventional dairy commodity prices toward the end of the year, it now appears that prices will likely remain high for the balance of the year, due in part to continued strong demand for nonfat dry milk powder," Jack Callahan, Dean chief financial officer, said in a statement.
Dean said the job cuts, which will affect Dean Foods Dairy Group employees from across the country, would start with voluntary departures followed by involuntary departures if necessary. The cuts should be finished by late October, and should lead to a restructuring charge in the third quarter, Dean said.
In March Dean took on $4.8 billion in debt in order to pay shareholders a special dividend of $15 per share, a move seen as a defense against private equity firms looking for a takeover target.