GIS Discusses Growth Plans for 2014 - Analyst Blog
July 11 2013 - 5:42PM
Zacks
General Mills Inc. (GIS), a global consumer
food company, recently discussed its outlook and growth strategies
for fiscal 2014 at the New York Stock Exchange.
Fiscal 2014
Outlook Retained
Growth in fiscal 2014 is expected to be in line with its long-term
targets and driven by new products, increased brand support and
cost savings from the Holistic Margin Management (HMM) program. The
company maintained its prior guidance for fiscal 2014. Earnings per
share are expected to grow at a high single-digit rate in a range
of $2.87 to $2.90.
The company continues to expect net sales to grow at a low
single-digit rate and exceed $18 billion in fiscal 2014 on the back
of new product innovation and contribution from new businesses such
as Yoplait Canada and Yoki. The U.S. retail business is expected to
benefit from new product launches and increased innovation, while
the international business will gain largely from the
newly-acquired businesses.
Segment operating profit is expected to grow in mid-single digits.
The company expects margin to expand in fiscal 2014 on the back of
cost savings from the HMM program. Capital spending is expected to
be around $700 million.
Moreover, the company plans to increase dividends and share
buybacks in the year, thus offering greater shareholder value. The
increased buybacks are expected to lower the average number of
shares outstanding by 2% in fiscal 2014. The company also plans to
increase its dividend by 15% effective from the quarterly payment
due on Aug, 01.
Strategies
Product Innovation
The company intends to launch more than 200 new products in the
first half of fiscal 2014. More products are expected to be
introduced later in the year.
In 2014 and beyond, in order to drive sales growth, General
Mills will focus on five global categories. These categories
include ready-to-eat cereals, super-premium ice creams, convenient
meals, wholesome snack bars and yogurt. These categories are highly
responsive to innovation and are capable of meeting evolving
consumer needs. General Mills’ retail sales in the five global
categories are growing at attractive rates and all of these have
promising long-term growth potential.
Focus on Cereals
General Mills operates a $4 billion cereal segment. The company
intends to offer new cereal options and brand building in the U.S
cereal market in 2014. Some of the new products are Hershey’s
cookies & Creme cereal and two varieties of Nature valley
granola cereal. The company intends to expand the distribution of
BFast, a breakfast shake.
Focus on Yogurt Business
General Mills generates $3 billion of sales from yogurt segment.
The company intends to launch a new line of Yoplait Greek strained
yogurt. The company also plans to increase its advertising
expenditure and focus on product innovation, in order to drive
sales.
The U.S. yogurt business has been challenging as increased sales
prices in response to dairy cost inflation is reducing the
competitiveness of its products. With the latest brand building and
product innovation, the company expects its U.S. yogurt business to
return to growth in fiscal 2014. The company has several products
planned for its yogurt business in Europe and U.K.
Focus on Snacks
General Mills’ snacks segment is a $3 billion business. The company
plans to introduce products like Nature Valley soft baked oatmeal
squares, Fiber One, Ckex snack chips and Betty Crocker caramel
Brownies in the U.S. It has products lined up for Europe and
Brazil as well.
Focus on Meals
The company has planned several innovations for the meal segment
also, which includes brands like Old el Paso and Helpers. The
company will also launch several new products in China and
Brazil.
Ice Cream
The company has initiated a global advertising campaign on Haagen-
Dazs. The company intends to open more than 70 new Haagen- Dazs
cafes in 13 cities in China in fiscal 2014.
Focus on International market
General Mills also discussed its plans to shift the geographic mix
of its business towards the international markets with particular
focus on the emerging markets. Currently more than 1/3rd of its
sales are generated from the international markets including about
$2 billion in sales from the emerging markets.
General Mills carries a Zacks Rank #3 (Hold).
Other food companies that have been doing well consistently are
Flower Foods Inc. (FLO) and B&G Foods
Inc. (BGS) both carrying a Zacks Rank #1 (Strong Buy) and
Campbell Soup Company (CPB) carrying a Zacks Rank
#2 (Buy).
B&G FOODS CL-A (BGS): Free Stock Analysis Report
CAMPBELL SOUP (CPB): Free Stock Analysis Report
FLOWERS FOODS (FLO): Free Stock Analysis Report
GENL MILLS (GIS): Free Stock Analysis Report
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