By Savyata Mishra
(Reuters) -Kellanova, formerly Kellogg, and its newly spun-off North America cereal business WK Kellogg beat third-quarter sales estimates on Wednesday, supported by higher prices for their ready-to-eat breakfast cereals and snacks.
Shares of Kellanova were about 2% higher while WK Kellogg rose about 4%.
"Kellanova business gets an immediate lift from the absence of North America cereal, and should continue to benefit" with price hikes catching up to higher input costs, easing supply-chain snarls and more promotions, company executives said on a post-earnings call.
Packaged food companies from Kraft Heinz (NASDAQ:KHC) and Campbell Soup (NYSE:CPB) to Mondelez (NASDAQ:MDLZ) have grown their margins through repeated prices hikes over the last two years.
But Kellanova and WK Kellogg warned that persistent inflation had made consumers sensitive to increased prices.
"The consumer is clearly strained. But I think ... (they) are becoming much more used to different price points," Kellanova CFO Amit Banati said.
Kellanova, home to brands including Cheez-It crackers and Pringles, recorded a 7.4% decline in overall volumes for the quarter, while WK Kellogg posted a 13.4% fall following double-digit price hikes across their product ranges.
"Price hikes offer a short-term sugar high that can quickly fade if it pushes shoppers to private labels," said Zak Stambor, a senior analyst with Insider Intelligence.
Kellanova's net sales in North America fell slightly, even as the Europe and Latin America regions posted growth.
Kellogg Company (NYSE:K) in October completed the spin-off of its North American cereal business into a new standalone entity called WK Kellogg, and renamed itself Kellanova, to sharpen focus on each division.
Kellanova posted quarterly net sales of $3.94 billion, beating analysts' expectations of $3.62 billion, according to LSEG data.
Its adjusted profit of $1.03 per share was above estimates of 84 cents.
WK Kellogg reported better-than-expected sales of $692 million.