Treehouse Foods hit by weak grocery sales

SAN FRANCISCO (MarketWatch) � Treehouse Foods shares tumbled 12% Friday after the maker of private label foods cut its outlook, citing a shift in consumer buying habits during the last three months of 2011.

Treehouse said purchases of dry groceries in the fourth quarter posted their sharpest decline since 2005 and that consumers bought more food at club stores and cut-rate retailers, rather than supermarkets. Shoppers saw higher grocery prices throughout 2011 as U.S. packaged food makers jacked up prices to blunt elevated costs for food ingredients and fuel.

Treehouse THS � shares dropped to $55.05 Friday morning, and the company�s warning pressured shares of other U.S. food makers.

Campbell Soup CPB �, Dean Foods DF �, and H.J. Heinz HNZ � all fell close to 2%.

J.M. Smucker SJM �, Ralcorp RAH � and General Mills GIS �declined 1%. Kraft Foods KFT � also fell.

Treehouse also blamed mild winter weather in the Midwest and Northeast that affected sales of its canned soups, non-dairy creamers and hot cereals.

Citing industry data that measures sales at U.S. food retailers, Treehouse said December unit volumes fell 8.8% for soup, 4.7% for non-dairy creamers and 4.6% for hot cereal.

For the last 12 weeks of 2011, Treehouse said private label sales slipped 1.7%, while brand name food volumes declined 5.3%.

�We are disappointed in our finish to the year, especially after engineering a mid-year recovery in our private label revenues and margins. Our turnaround was derailed by a sudden drop in volume that affected TreeHouse and the whole of the packaged foods industry,� Treehouse Chief Executive Sam Reed said in a statement.

Oak Brook, Ill.-based Treehouse also makes instant oatmeals, pickles, salad dressings, sugar-free drink mixes, jams and pie fillings. The food company went public in 2005 to take advantage of the growth in private label foods and has grown through a number of acquisitions.

For the fourth quarter, Treehouse said it expects to report a profit between 84 cents and 87 cents a share on sales of $535 million.

Analysts had estimated Treehouse would earn $1.07 a share on sales of $565 million, according to FactSet Research.

Treehouse will report earnings Feb. 10.