General Mills maintained its annual sales and profit forecasts on Wednesday, as the Cheerios maker grapples with rising economic uncertainty and softer demand in key markets, including North America.
Rising consumer prices and a cooling U.S. labor market have squeezed household budgets, steering shoppers to cheaper private-label alternatives and pressuring packaged food makers across the region.
The Minneapolis-based company saw quarterly volumes in its North America segment decline 16 percentage points compared with a year earlier and now expects overall category growth to fall below its long-term targets.
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Tough environment for food processors
General Mills reaffirmed its annual targets of adjusted profit declining 10 per cent to 15 per cent and organic net sales ranging from down one per cent to up one per cent.
The first-quarter results underscore how tough the current environment is for food makers, who need to invest heavily to reignite volume growth, as consumers remain price-conscious but expect benefits such as added protein and distinctive flavors, Consumer Edge analyst Connor Rattigan said.
Shares were down one per cent in choppy early morning trading. The stock has dropped about 22 per cent this year.
General Mills posted a smaller‑than‑expected quarterly sales decline, helped by volume gains in its North America pet food unit and in international markets including India, China, Japan and Europe.
Net sales in the international segment rose six per cent in the quarter ended August 24, with pricing up six percentage points.
“We continue to see consumers seeking value and prioritize their spending on key benefits like protein, bold flavors, and feelings of nostalgia from brands they love,” said CEO Jeff Harmening in prepared remarks.
Pet food gains support sales
North America pet food net sales increased six per cent, partly due to the recent acquisition of Whitebridge Pet Brands’ North America business, after a one per cent decline a year earlier.
First-quarter sales fell 6.8 per cent to $4.52 billion (C$6.22 billion), slightly better than expectations for a 6.9 per cent drop to $4.51 billion, according to data compiled by LSEG.
General Mills’ adjusted profit of 86 cents per share topped estimates of 81 cents, driven partly by price increases in international and North America pet food segments.
— Reporting by Anuja Bharat Mistry and Sanskriti Shekhar in Bengaluru
