GIS General Mills Inc

By Annie Gasparro and Allison Prang 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 19, 2018).

General Mills Inc. is struggling to revive sales in the U.S. as growth in its new pet-food business slows.

The food maker's sales rose 8.6% to $4.09 billion in the latest quarter, driven by international revenue. General Mills' sales in its main North American market dropped 2.1% to $2.39 billion, more than analysts expected. Shares, down 19% year to date, were off 7.9% at midday Tuesday.

The Minneapolis-based conglomerate has tried to offset stagnant sales with a move into high-end pet food, a business that is expanding rapidly compared with packaged, process food. General Mills completed the acquisition of Blue Buffalo for $8 billion in April and has focused since on getting the pet food into more stores.

General Mills' pet-food sales rose 14% in the latest quarter to $343.4 million on a comparable basis. Sales at retailers increased 9%. That is faster sales growth than for the company's main packaged foods, but a slowdown from Blue Buffalo's sales when General Mills agreed to buy it in February.

"If all my businesses had decelerated to 9% growth, I'd be in pretty good shape," Chief Executive Jeff Harmening said in an interview.

General Mills executives said new products, stronger marketing and wider distribution will help the company meet the high expectations that investors have for the pricey acquisition. General Mills is expanding Blue Buffalo from distribution primarily at pet stores to supermarkets and mass retailers.

"We still only have 3% household penetration among pet parents," Mr. Harmening said. "We have a lot of room to expand."

The bet on pet food comes after years of pressure on General Mills' cereal and yogurt businesses, as consumers abandoned those products for newer brands or other breakfast foods that seem fresher and healthier.

U.S. snack sales for General Mills fell 4% in the latest quarter, while sales of yogurt such as Yoplait declined 2%, as did sales of meals and baking products such as Betty Crocker cake mix. U.S. sales of cereal brands such as Cheerios and Lucky Charms, rose 1%.

"As industry trends improve, we've seen our competitiveness improve," Mr. Harmening said.

General Mills' total organic net sales, which take out impacts from things such as changes in foreign-exchange rates, rose 0.5% in the quarter.

General Mills has also raised prices this year to make up for rising transportation and ingredient costs that have hit the industry. Profit declined as net interest climbed more than 80% from the comparable quarter a year earlier because of the Blue Buffalo deal.

The company reported earnings of $392.3 million, down 3.1% from the comparable quarter a year earlier. On an adjusted basis, the company reported earnings of 71 cents a share, above analysts' estimates of 64 cents.

Write to Annie Gasparro at annie.gasparro@wsj.com and Allison Prang at allison.prang@wsj.com

(END) Dow Jones Newswires

September 19, 2018 02:47 ET (06:47 GMT)

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