BATTLE CREEK, MICH. — WK Kellogg Co marked its first full year as a stand-alone company with fiscal 2024 third-quarter adjusted earnings per share that hit the high end of Wall Street’s forecast, despite a reported net loss.

Gary Pilnick, chairman and chief executive officer, noted the breakfast cereal manufacturer’s milestone in a Nov. 7 conference call with analysts. The transaction dividing Kellogg Co. into two public companies — WK Kellogg Co and Kellanova — was completed Oct. 2, 2023. At that time, WK Kellogg represented 15% of the legacy company’s business, or less than $3 billion in annual sales.

“It has been a year since we became an independent company, and we are pleased with the results we have delivered,” Pilnick said. “We’re equally pleased with how we’re delivering those results.”

In the quarter ended Sept. 28, Battle Creek-based WK Kellogg sustained a net loss of $11 million, which compared with net income of $42 million, equal to 49¢ per share on the common stock, a year ago. On a stand-alone adjusted basis, third-quarter net earnings were $27 million, or 31¢ per share, versus $25 million, or 29¢ per share, a year earlier. Analysts, on average, had projected adjusted EPS of 26¢, with estimates ranging from 24¢ to 31¢.

WK Kellogg attributed the decline in reported earnings mainly to business portfolio realignment and restructuring costs from a three-year supply chain modernization plan unveiled in August. The company said at the time that the $450 million to $500 million plan would include cash restructuring and non-restructuring costs totaling about $110 million. 

“Last quarter, we provided more details about our supply chain modernization journey, the plan for our capital investment and network consolidation to drive longer-term sustainable advantage in our business,” Pilnick said. “Supply chain is the foundation of many consumer product companies, and a key strategic priority is strengthening our foundation so we can build into the future.”

Third-quarter net sales came in at $689 million, down 1.9% from $692 million a year earlier. However, stand-alone adjusted net sales rose 0.7%, reflecting a 1.8% increase in price/mix and a 1.1% decline in volume. WK Kellogg said the uptick in adjusted net sales stemmed from a sequential improvement in volume — bolstered by strong back-to-school season execution — that benefited from improved supply.

“We told you we expect a stronger second-half sales performance due to improvements in our commercial execution and the lapping of the challenging environment that emerged in Q3 of 2023,” Pilnick said. “Indeed, our sales trajectory did improve and was driven by quality commercial programming, better back-to-school activation, continued strength in Canada and improved performance in non-measured channels.”

A finer-tuned supply chain also played a key role in the quarterly results, Pilnick said.

“Our supply chain performance is improving as our team continues to deliver better levels of customer service, allowing retailers to replenish inventory to more normal levels, which positively impacted our shipments,” he said. “Our top-line performance, along with continued operational focus and discipline, led to another quarter of gross margin expansion. For the quarter, we achieved gross margin of 29.4%, a 90-basis-point increase versus last year.”

For the year to date, WK Kellogg said overall net sales decreased 2.1% to $2.07 billion but were down 0.7% on a stand-alone adjusted basis. US dollar sales for the nine months fell 2.3% from the prior-year period, with dollar share dipping 30 basis points to 27.6%.

“In the US, our consumption performance, measured by Nielsen XAOC, improved sequentially to down 1.8% in the quarter due to increased merchandising with key customers and successful seasonal activations,” Pilnick said. “We continue to maintain our share position at 27.6%, which improved modestly versus last quarter. We saw share gains during the back-to-school period of August through early September on our participating brands. We also saw sequential improvement in line with expectations and unit volume turn positive, driven by our PPA strategy, which focuses on ensuring that we’re meeting the consumer with the right product in the right channel.”

Five of WK Kellogg’s Core 6 largest cereal brands — Kellogg’s Frosted Flakes, Special K, Raisin Bran, Froot Loops, Frosted Mini Wheats and Rice Krispies, representing about 70% of sales — have gained or held market share through the end of the third quarter.

“This group continues to benefit from the performance of Frosted Flakes and Raisin Bran, which remain the fastest-growing brands in the category,” Pilnick said. “That said, we continue our work to improve the trajectory of Special K, which, consistent with its recent performance, was down 40 basis points of share in the quarter. While it will take time for the brand to perform to our expectations, the team has a more complete commercial plan for 2025, and we are already getting started with the launch of our new ‘Special for a Reason’ campaign. Excluding Special K, our Core 6 was up 30 basis points of share in Q3 and up 20 basis points of share year-to-date.”

Similarly, four of the five Next Core cereal brands — Kellogg’s Corn Flakes, Apple Jacks, Corn Pops, Krave and All-Bran — have maintained or expanded share so far this year.

“Corn Pops and Apple Jacks were key brands during our back-to-school activation and delivered positive dollar consumption in the quarter,” Pilnick said. “In fact, when you look at year-to-date, Corn Pops and Corn Flakes have gained 10 basis points of share, benefiting from improved supply.”

He cited improving trends in the company’s Natural & Organic segment, which includes the Kashi and Bear Naked brands. Despite being in a burgeoning category, the brands were managed separately prior to WK Kellogg’s spin-off and consequently have lagged in share growth.

“Our Natural & Organic group is showing signs of sequential improvement, as we’re starting to see the positive impact of innovation in our retail sales execution,” Pilnick said. “Bear Naked had improved supply in the quarter, and so — on nearly flat dollar consumption, along with positive unit volume — affirming that when the brand is on-shelf, it performs. We spoke to you about improving supply last quarter, and we are pleased with a meaningful improvement in market. Continuing to build momentum in the growing N&O segment is a big opportunity for WK (Kellogg).”

WK Kellogg upheld its previous full-year 2024 outlook for adjusted net sales growth of down 1% to up 1%. The company lifted its guidance for adjusted EBITDA, which rose 18.2% in the third quarter and was up 27.5% on a stand-alone adjusted basis.