Kraft Profit Falls on Marketing Costs; Company Beats Forecasts

Boxes of Kraft Macaroni and Cheese.
Morry Gash
Boxes of Kraft Macaroni and Cheese.

Kraft Foods on Wednesday posted a lower quarterly profit as the largest U.S. food company spent more money on marketing to try to jump-start sales in its last quarter as a unit of Altria Group/

The maker of Oreo cookies, Oscar Mayer lunch meat and a host of other products, said profit was $702 million, or 43 cents a share, in the first quarter, compared with $1.01 billion, or 61 cents, a year earlier.

Excluding the costs of a restructuring and a gain from tax reserves transferred to Kraft from Altria, earnings were 44 cents a share. Analysts on average forecast 42 cents a share, according to Reuters Estimates.

Sales rose 5.7% to $8.59 billion, the company said.

But Kraft's operating margin fell to 14% from 15.2% a year earlier, excluding one-time items, because of higher spending on marketing and "quality improvements," higher ingredient costs and the divestiture of some businesses, among other items.

Kraft , which was spun off from Altria at the end of March, is embarking on a plan to develop new products that combine many of its best-known brands, ramping up marketing spending and becoming more effective at cost-cutting efforts.

But Chief Executive Irene Rosenfeld suggested in February when she unveiled the plan that it could take Kraft two years to get things moving under the new strategy.

For the year, the company affirmed its forecast calling for earnings of $1.50 to $1.55 a share. Excluding restructuring costs, the forecast is $1.75 to $1.80 a share. Analysts on average were forecasting $1.81 a share, according to Reuters Estimates.