Cheerios cereal maker General Mills has posted a bigger-than-expected drop in quarterly sales as cash-strapped consumers cut back on its higher-margin products and turned to cheaper alternatives.
The company has struggled with lower volumes and retailers cutting down on inventory while also facing ongoing competition from lower-priced private labels that have been eroding its market share.
However, benefits from price hikes in previous quarters were eclipsed by pressures from raw materials costs like sugar and labour.
The company's quarterly net sales fell to $4.71 billion (€4.4 billion) from $5.03 billion (€4.7 billion) a year ago. Analysts, on average, had expected sales of $4.85 billion (€4.5 billion), according to LSEG data.
Full-Year Performance
Full-year net sales at General Mills declined 1% to $19.9 billion (€18.6 billion), while operating profit remained flat at $3.4 billion (€3.2 billion).
Adjusted operating profit increased 4% in constant currency to $3.6 billion (€3.4 billion).
Commenting on the company's performance, General Mills chairperson and chief executive officer Jeff Harmening, stated, “We drove improved volume performance in the second half of the year and generated industry-leading levels of Holistic Margin Management (HMM) cost savings, allowing us to protect our brand investment while still delivering on our profit and cash commitments.”
Net earnings attributable to the company fell 4% to $2.5 billion (€2.3 billion), while diluted earnings per share of $4.31 matched the results of the preceding financial year.
Outlook
For the new financial year, General Mills will focus on accelerating organic net sales growth and volume growth.
Harmening explained, “We plan to drive another year of strong HMM cost savings, allowing us to reinvest in exciting growth ideas that meet evolving consumer needs.”
The company is "ready to capitalise" on new opportunities, advance its Accelerate strategy, and deliver for consumers and shareholders in the year ahead, he added.
News by Reuters, additional reporting by ESM.
