Kellogg Co. (NYSE:K) has revised its annual profit forecast, anticipating a smaller decline than initially projected. The company’s decision to implement multiple price hikes on its breakfast snacks and cereals bolstered its profit margins, giving a positive outlook for the year ahead.

Despite these positive developments, Kellogg fell short of meeting Q2 sales estimates. The company struggled to attract customers who were grappling with persistent inflation rates, impacting consumer spending habits.

While the price increases provided confidence to the maker of Honey Loops, customers faced with sticky inflation resisted further hikes, resulting in decreased sales volumes. Edward Jones analyst Brittany Quatrochi pointed out that the benefits from pricing are expected to wane throughout the year, making sales volumes a crucial factor in driving revenue.

During the reported quarter, Kellogg’s pricing rose by 14.7%, leading to a 7.6% decline in organic volumes. RBC Capital Markets analyst Nik Modi predicted that mounting pressures on consumers might lead to increased reliance on private-label products and promotions, further impacting volumes and potentially limiting Kellogg’s earnings per share in 2023.

While Kellogg remains renowned for its products like Pringles and Pop-Tarts, the company now anticipates its 2023 adjusted profit per share to decline between 1% and 2%, a more optimistic outlook compared to its previous forecast of a decline between 1% and 3%.

In the second quarter, Kellogg reported sales of $4.04 billion, which fell slightly below analysts’ expectations of $4.07 billion. This indicates a slowdown in demand for Kellogg’s cereals and snacks in the face of higher prices.

Despite the sales challenge, Kellogg managed to surpass market expectations by reporting an adjusted profit of $1.25 per share in the quarter ended July 1, beating estimates of $1.11 per share.

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