Mondelez International Beats Q1 Sales, Profit Estimates as Prices Rise

Mondelez International has surpassed the forecasted figures for sales and earnings in the recent quarter.

The company’s strategy of raising prices on consumer favorites like chocolate and snack crackers has maintained solid demand, despite the higher prices.

This price adjustment came in response to the escalating expenses in production, such as labor and transportation.

Financial Highlights:

• Price Increment: Mondelez marked up product prices by 6.3%, which resulted in a 2.1% drop in sales volume.
• Sales Performance: The decline in volume did not prevent an increase in net sales, which amounted to $9.29 billion, surpassing the predicted $9.16 billion.
• Profit: An adjusted profit figure reached 95 cents per share, outperforming the analyst projection of 89 cents per share.
• Gross Profit Margin: There was a significant improvement in gross profit margin, reaching 51.1%, a marked increase from the previous quarter’s 37.3%.

Despite the positive outcome on profitability, the hike in price points led to a reduction in the purchasing frequency among more budget-sensitive consumers.

The shift in buying behavior was especially noticeable in Europe, which is a substantial market for Mondelez.

Volume sales in that region declined by 3.5%, a contrast to the increase observed in the previous quarter.

Competitors in the industry, like Campbell Soup, experienced a similar pattern. They noticed a drop in volume after price increases, though this did not prevent revenue growth due to persistent consumer demand.

Market Reaction & Forecast:

• Post-announcement, Mondelez’s shares experienced a slight decline of 1%, potentially due to the company’s decision to maintain its current full-year revenue and profit outlook.
• The company’s robust brand strength within resilient market segments such as chocolates and biscuits remains evident, which indicates that such products can bear price escalations to an extent before consumers seek more cost-effective alternatives.

Original Article Link: Yahoo Finance