Yogurt Declines Continue to Hurt General Mills -- 2nd Update
June 28 2017 - 10:50AM
Dow Jones News
By Austen Hufford
General Mills Inc.'s new chief executive said he would invest in
turning around declining sales as the struggling yogurt business
continues to weigh on the company.
General Mills said revenue fell short of its standards as sales
declined for the eighth straight quarter.
On an earnings call with investors, CEO Jeff Harmening said much
of General Mills' struggles in the past year were "self-inflicted,"
through missteps like a lack of innovation in yogurt and pricing
its products too high.
"The vast majority of our challenges are correctable, both in
the U.S. and other places," he said. The company is working to
improve its sales trends.
The Minneapolis-based food giant also acknowledged that margin
growth would suffer as it invests in efforts to restore sales
growth.
Still, shares rose 2.7% in early trading, as the company's
latest quarterly results beat Wall Street expectations.
Gross margin fell to 34.7% in the quarter from 35.1%, as
unfavorable commodity impacts offset cost savings.
The company expects organic net sales, which exclude currencies
and deals, to continue to fall in the new fiscal year, declining 1%
to 2% in all. Organic sales fell 3% in the company's just-completed
fourth quarter.
Mr. Harmening recently took the top job at General Mills after
completing a transition plan where he pushed deals that targeted
consumers' hunger for fresh and natural foods.
The industry has been working to adapt to consumers who are
increasingly looking for healthier and fresher brands.
Lower food costs and other savings helped General Mills and its
peers deliver solid earnings on lower revenues for a time. Now
sales declines are catching up with them, and falling food prices
are sparking price wars on some products.
In the quarter, General Mills' North American retail sales fell
3%, driven by a double-digital fall in yogurt.
General Mills in recent years has made Cheerios gluten-free,
removed artificial colors from Trix cereal, bought Annie's
Homegrown natural and organic snacks, and removed aspartame from
Yoplait Light.
The company has said previously that declines in light and Greek
yogurt varieties were hurting results, along with a gap in
promotional levels between General Mills and its competition. This
week the company introduced "French-style" yogurt to try to boost
the category. The new, thick yogurt is cultured for eight hours in
the small glass jars it is sold in, and doesn't contain artificial
flavors or preservatives.
The company also raised its dividend by 1 cent to 49 cents, the
smallest increase since 2010.
In all, for the quarter that ended May 28, General Mills
reported net income of $408.9 million, or 69 cents a share, up from
$379.6 million, or 62 cents a share, in the year-ago period.
Revenue fell 3.1% to $3.81 billion.
Analysts polled by Thomson Reuters expected per-share profit of
71 cents and revenue of $3.75 billion.
--Annie Gasparro contributed to this article.
Write to Austen Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
June 28, 2017 10:35 ET (14:35 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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