Kraft Heinz Posts $6.4 Billion Operating Loss on Impairment Charge
A $7.4 billion non-cash impairment drove Kraft Heinz to a GAAP operating loss in the quarter, even as management narrowed its full-year sales-decline forecast.
Kraft Heinz (KHC), the packaged-foods maker behind brands including Heinz ketchup, Kraft macaroni and Oscar Mayer, reported a GAAP operating loss of $6.4 billion for the second quarter of 2026, driven by a $7.4 billion non-cash impairment charge. Adjusted earnings per share fell 18.8% to $0.56, a steeper drop than the 6.5% decline to $0.58 the company reported in the first quarter.
The quarter marked a reversal from the trajectory Kraft Heinz had shown earlier in the year. Net sales declined 1.4%, with organic net sales down 1.3%, after net sales had grown 0.8% in the first quarter even as organic sales slipped 0.4% then. Volume and mix, the more closely watched measure of underlying demand, worsened to a negative 2.6 percentage points from negative 1.2 points in the first quarter, while price contribution held roughly steady.
Gross profit margin fell 200 basis points to 32.4%, compared with a 230-basis-point gain to 36.7% in the prior quarter, though the adjusted gross margin measure held flat year over year at 34.1%, an improvement from the 30-basis-point erosion reported in the first quarter. Adjusted operating income fell 18.4% to $1.0 billion, worse than the first quarter's 11.8% decline to $1.1 billion.
North America drove the deterioration. Segment net sales fell 2.7%, a sharper drop than the first quarter's 0.7% decline, and segment adjusted operating income fell 15.8% to $988 million, the primary driver of the consolidated profit decline. Emerging markets moved the opposite direction, with net sales up 10.4% and organic growth accelerating to 8.5% from 3.8% in the first quarter. The impairment itself, while the proximate cause of the reported loss, was smaller than the $9.27 billion charge Kraft Heinz took in the second quarter of last year, which narrowed the year-over-year change in the GAAP operating loss even as it widened the sequential swing from the first quarter's $1.1 billion GAAP operating income.
Kraft Heinz raised its full-year organic net sales guidance to a decline of 0.5% to 2.0%, narrowed from a prior range of down 1.5% to 3.5%. The company also narrowed its adjusted EPS guidance to $2.03 to $2.09 from $1.98 to $2.10 and lifted its free-cash-flow conversion target to roughly 110% from about 100%. Those improvements came alongside a cut to profitability guidance: full-year constant-currency adjusted operating income is now expected to fall 16% to 18%, worse than the prior 14% to 18% range. The company expects an incremental headwind of about 100 basis points to organic net sales from reduced U.S. food-assistance program benefits, a factor not mentioned in the first-quarter release, and plans to raise incremental investment spending to about $700 million for the year, up $100 million from its earlier plan.
Year-to-date free cash flow grew 10.3% to $1.7 billion, a marked slowdown from the 58.9% growth rate reported through the first quarter, with operating cash flow growth also decelerating to 8.2% from 39.7%. Kraft Heinz did not repurchase any shares during the quarter under its buyback program, a halt not disclosed in the first-quarter release. Between the two earnings reports, the company completed a $1.1 billion cash tender offer for its 2046 and 2049 senior notes, funded by new senior unsecured note issuance.