Kraft reported a fourth-quarter profit of $89 million, or 15 cents a share, down from $319 million, or 54 cents, a year earlier. The most-recent quarter included about $225 million of market-based impacts from post-employment benefits, $135 million of restructuring charges and $46 million of losses from hedging activities.
Revenue dropped 11% to $4.49 billion, while organic revenue, which exclude acquisitions, divestitures and currency effects, fell 7.2%.
In other words they lost 7.2% of their gross business when ignoring the impact of exchanges rates and similar things.
That's bad, but what's far worse is the impact on operating margin which collapsed from 10.1% to 5.8%, a drop of more than 40%.
While the original reaction in the stock was negative it has recovered most of the pre-market losses at this point.
But the warning expressed in these results could not be more clear -- the consumer is tapped out and shifting down-market or simply buying less, and when -- not if -- that comes out in results it will massacre profits; a 40% loss in operating margin would nearly double the P/E of the market!
Now sure, not every company is Kraft. But there are few firms that better capture the general view of non-discretionary purchases among Americans "in one package" when it comes to the grocery store.
Everyone needs to eat, and yes, that is an alarm bell you're hearing.
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
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