Input inflation impacts Hillshire Brands
by Keith Nunes
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CHICAGO — The rising cost of inputs hindered Hillshire Brands during the second quarter of fiscal 2014. For the quarter, the company’s operating income fell 23 percent to $116 million. Sales for the quarter rose 2.1 percent to $1,082 million.
“During the quarter, we implemented pricing actions on the businesses most affected by inflation,” said Sean Connolly, president and chief executive officer. “Encouragingly, the volume impact we saw was more modest than expected, with most consumers remaining loyal to our brands. The associated benefit, along with strong supply-chain productivity and timing of expenses, enabled us to deliver strong performance on the bottom line.
“As we’ve moved into the second half, our pricing actions have become more broad-based. This reflects our revised expectation of significantly higher input cost inflation throughout the remainder of the fiscal year. We’ve also increased our investment plans for second-half MAP to further support our core brands and exciting new innovations,” he added.
For the first half of fiscal 2014, Hillshire Brands’ total operating income was $171 million, a 44 percent decline from the first half of fiscal 2013 when it recorded an operating income of $215 million. Sales for first six months rose 1.6 percent to $2,066 million.
The company said it expects sales to grow during the back half of the year as new innovations are introduced and marketing and promotion investments are implemented in order to offset volume softness due to pricing actions taken by the company.