Sales at the European arm of food giant General Mills fell in the first quarter of the group's financial year, with the company citing unfavourable foreign currency exchange rates, as well as a 'challenging retail environment' in some markets.
The group's Europe & Australia division saw net sales fall 9% to $454 million (€411.3 million) in the period, however it said that its performance was slightly offset by benefits from net price realisation and mix.
Organic net sales at the division were down 5%, with the group citing challenges in the French market for its yoghurt and ice cream brands, as well as differences in merchandising phasing.
On a constant-currency basis, the operating profit of the Europe & Australia segment fell by 15%, with the group saying that this was driven primarily by a 'timing difference in brand-building investment and lower volume'.
Overall Performance
Overall, the group said that net sales were down 2% to $4.0 billion (€3.62 billion) in the period, with organic net sales down 1%, reflecting lower organic volumes.
However, operating profit was up 10% to $662 million (€599.5), while operating profit margin of 16.5% increased 180 basis points. Constant-currency adjusted operating profit increased 7%.
The profit boost came as Jeff Harmening, chief executive praised the group's efforts to become a "nimbler, more consumer-connected" organisation.
“Our first-quarter net sales performance included encouraging improvement in North America Retail and strong growth in Pet, driven by good innovation and effective brand-building investment," he said. "We got off to a slower start in our other segments, and we’re taking actions to drive topline improvement for those segments and the company starting in the second quarter.
“On the bottom line, we delivered profit and earnings growth ahead of our expectations while continuing to invest in our brands and capabilities. We remain on track to deliver our fiscal 2020 goals, including accelerating our organic sales growth, maintaining our strong margins, and reducing our leverage.”
In terms of the group's other divisions, North America Retail saw flat reported net sales; its Pet division rose by 7%; Convenience Stores & Foodservice saw a 4% decline in reported net sales, and Asia & Latin America saw a 10% decline.
Outlook
Looking ahead to the coming year, General Mills expects organic net sales to increased by between 1% and 2%, due to benefits from currency translation, divestures executed in fiscal 2019, and contributions from the 53rd week in 2020.
It added that it expects consistent topline growth as a result of its reshaped portfolio, which will 'generate top-tier returns for General Mills shareholders over the long term'.
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
