General Mills topped market expectations for third-quarter sales and profit, backed by higher prices for its breakfast cereals, snack bars and pet food products that helped cushion a blow from slowing demand.
Shares in the packaged food maker rose about 3% in premarket trading after it reaffirmed its annual sales and profit targets for a third time this year.
The last two years have seen staple food makers, including General Mills, reap the benefits of consistent price hikes that helped shield their profit margins from spiralling raw materials, labour and supply chain costs, while seeing very little pushback from consumers.
However, sticky inflation and higher borrowing costs have now made customers more cautious with spending on expensive branded products and focus on buying cheaper private-label alternatives that are gaining more shelf space at retailers.
Quarterly Highlights
General Mills' gross margins rose 100 basis points year-on-year to 33.5%, helped by an increase in organic average selling prices in the third quarter.
Still, the company's quarterly organic volumes declined, joining peers such as Kraft Heinz in seeing softer demand.
The Minnesota-based company had most recently maintained its forecast in February, having previously reiterated it in September.
In the third quarter, the company also recorded $31 million (€28.52 million) of net recoveries related to a voluntary recall of certain international Häagen-Dazs ice cream products in fiscal 2023.
Its net sales dropped about 1% to $5.1 billion (€4.692 billion) in the third quarter, compared with analysts' expectations of sales to drop about 3.1% to $4.97 billion (€4.574 billion), according to LSEG data.
Excluding one-off charges, General Mills earned $1.17 per share in the quarter ended 25 February 2024, compared with estimates of $1.05.
“General Mills’ strategic focus on brand building, innovation, and in-store execution contributed to improved volume and market share trends in the third quarter,” said Jeff Harmening, chairman and chief executive officer of General Mills.
News by Reuters, additional reporting by ESM.
