General Mills Earnings Miss Estimates as Cereal Sales Slumpby
Cheerios maker facing sluggish demand in U.S. market
Strong salty-snack sales not enough to stem revenue decline
General Mills Inc., the maker of Cheerios and Lucky Charms, posted quarterly sales and earnings that missed analysts’ estimates, hurt by sluggish demand for breakfast cereals in the U.S.
Though its cost-cutting efforts have helped bolster profit, the company is struggling with a long-term domestic shift away from cold cereal. Its salty snacks like Bugles and Chex Mix continue to sell well, but not enough to keep total revenue from declining. Two recent transactions -- the sale of Green Giant and the acquisition of Annie’s Inc. -- also weighed on sales last quarter, General Mills said in a statement Thursday.
- Excluding some items, earnings were 82 cents in the second quarter, which ended Nov. 29. Analysts had estimated 83 cents.
- Sales fell 6.1 percent to $4.42 billion, missing a projection of $4.61 billion.
- The U.S. retail segment saw sales fall 4 percent to $2.76 billion.
- The shares declined 3.3 percent to close at $57.23 in New York, the biggest single-day drop since Sept. 28.
U.S. consumers are seeking out options that are perceived as healthier and more natural, forcing General Mills to reconsider its product lineup. Earlier this year, the company said it would remove artificial flavors and colors from all of its cereals. It also has added gluten-free Cheerios and Lucky Charms.
General Mills also took a step away from canned and frozen vegetables this year when it agreed to sell its Green Giant and Le Sueur businesses to B&G Foods Inc. for about $765 million. That followed the deal to buy Annie’s last year for about $800 million, bringing it products such as organic cheddar crackers and gluten-free ginger snaps.
General Mills has been helped by cost cuts under Project Compass, its restructuring plan, and other belt-tightening programs. In June, the company said it would eliminate 675 to 725 jobs to reduce administrative costs. General Mills said on Thursday that it now expects to save $500 million in costs by 2018.