Packaged foods company Kraft Heinz (NASDAQ:KHC) reported Q2 CY2025 results topping the market’s revenue expectations, but sales fell by 1.9% year on year to $6.35 billion. Its non-GAAP profit of $0.69 per share was 8.4% above analysts’ consensus estimates.
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Kraft Heinz (KHC) Q2 CY2025 Highlights:
- Revenue: $6.35 billion vs analyst estimates of $6.27 billion (1.9% year-on-year decline, 1.2% beat)
- Adjusted EPS: $0.69 vs analyst estimates of $0.64 (8.4% beat)
- Adjusted EBITDA: $1.54 billion vs analyst estimates of $1.47 billion (24.3% margin, 4.9% beat)
- Management reiterated its full-year Adjusted EPS guidance of $2.59 at the midpoint
- Operating Margin: -126%, down from 8.1% in the same quarter last year
- Organic Revenue fell 2% year on year vs analyst estimates of 3% declines (101.2 basis point beat)
- Sales Volumes fell 2.7% year on year, in line with the same quarter last year
- Market Capitalization: $32.37 billion
StockStory’s Take
Kraft Heinz’s second quarter drew a negative market response, as investors focused on continued sales declines and a sizeable impairment charge despite the company beating Wall Street’s revenue and profit expectations. Management attributed the quarter’s results to ongoing investments in product quality, marketing, and manufacturing, though North American retail volume trends remained subdued. CEO Carlos Abrams-Rivera acknowledged that the company is “actively progressing” on a review of strategic options to unlock value but provided no new details. CFO Andre Maciel noted that a sustained share price decline triggered a $9.3 billion impairment, emphasizing it was not tied to operational performance.
Looking ahead, Kraft Heinz’s full-year outlook is anchored in ongoing investments in product renovation, marketing, and emerging markets expansion. Management reiterated confidence in its strategy, highlighting plans to increase marketing spend and broaden the Brand Growth System across more brands. Abrams-Rivera emphasized, “We are making sure we spend—continue to invest in marketing,” and sees innovation and international growth as levers to offset volume headwinds in legacy categories. Tariffs and commodity inflation remain risks, with Maciel projecting a continued impact into 2026.
Key Insights from Management’s Remarks
Management identified product innovation, emerging markets growth, and disciplined pricing as key themes in the quarter. Strategic review efforts and brand investments also featured prominently.
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Strategic review ongoing: CEO Carlos Abrams-Rivera reiterated that the board is urgently evaluating options to unlock long-term value, including potential separations or restructuring. While no specific actions were announced, management stressed that any move would be made with financial discipline and shareholder value in mind.
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Impairment charge explained: CFO Andre Maciel clarified that the $9.3 billion noncash impairment reflected a sustained stock price decline, reducing the carrying value of intangible assets. He noted this was anticipated in previous filings and unrelated to changes in business fundamentals or brand performance.
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Emerging markets outperformance: Kraft Heinz’s emerging markets business grew approximately 8% year-on-year, driven by both volume and price. Management singled out the Heinz brand, which delivered 18% growth in these regions, as a key driver of international momentum and margin expansion.
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North America retail remains challenged: The company’s core North American retail segment continued to experience volume declines, particularly in categories like cold cuts and bacon. However, management cited improvements in other areas of the portfolio and pointed to investments in e-commerce and product renovation as supporting gradual stabilization.
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Increased investment in marketing and innovation: Management is stepping up marketing spend to nearly 4.8% of sales by year-end—the highest in a decade—and accelerating the Brand Growth System across more brands. Recent product launches and renovations in Mac & Cheese, Lunchables, and Mayo are expected to drive improved performance, with 20% more new products hitting shelves in the second half of the year.
Drivers of Future Performance
Kraft Heinz’s outlook centers on expanded marketing, product innovation, and international growth, but is tempered by commodity inflation and tariff risks.
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Marketing and product renovation focus: Management is prioritizing increased marketing intensity and product upgrades, especially in North America, to address volume declines and support gradual improvement in retail sales trends. The Brand Growth System is expected to cover 40% of the business by year-end, up from 10% last year.
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Emerging markets as growth engine: The company is banking on double-digit growth in emerging markets, driven by streamlined portfolios and the Heinz brand’s expansion. Management believes this segment will offset softness in legacy North American categories and serve as a foundation for future margin gains.
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Persistent inflation and tariff headwinds: CFO Andre Maciel highlighted ongoing inflation in commodities such as meat and coffee, along with new tariffs expected to add about 100 basis points of margin pressure this year and a potential carryover impact into next year. Management is taking pricing actions below inflation but sees these factors as notable risks to margin recovery.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be monitoring (1) updates on the company’s strategic review and any potential business separations or restructurings, (2) evidence of stabilization or improvement in North American retail volumes as new products and marketing initiatives take effect, and (3) sustained double-digit growth and margin expansion in emerging markets. Progress on mitigating inflation and tariff impacts will also be a critical area of focus.
Kraft Heinz currently trades at $27.34, down from $28.60 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).
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