General Mills Profit Tops Estimates, Helped by Lower Costs

  • Company raises expense-reduction target by $100 million
  • Cereal sales show signs of rebounding in latest quarter

General Mills Inc., the maker of Cheerios and Trix, posted fourth-quarter profit that beat analysts’ estimates as lower expenses helped offset sluggish U.S. sales.

Profit was 66 cents a share, excluding some items, in the quarter ended May 29, the Minneapolis-based company said in a statement Wednesday. Analysts estimated 60 cents, on average. While sales fell 8.6 percent to $3.93 billion, that topped the average projection of $3.86 billion.

The results signal that General Mills’ cost-cutting drive is helping it weather a downturn in its cereal business, hurt by U.S. consumers eschewing the one-time breakfast staple. The company said its expense-reduction efforts will generate annual savings of $600 million by fiscal 2018, up from a previous target of $500 million.

“Fiscal 2016 was an important step forward for our business,” Chief Executive Officer Ken Powell said on a conference call Wednesday. “We strengthened our business model and drove a significant increase in our profit margin.”

General Mills shares rose 2 percent to $67.10 at 10:16 a.m. in New York after the results were released. The stock already had gained 14 percent this year through Tuesday.

Cereal Sales

General Mills has worked to boost cereal sales by adding gluten-free options and removing artificial colors and ingredients. Cereal sales fell 1 percent in the fiscal year that ended last month, but started to turn positive in recent months, according to the company.

Sales of gluten-free Cheerios were up 5 percent in the second half of the fiscal year. Seven cereals now made without artificial flavors and colors, which debuted in January, also saw improved sales. The brands, including Golden Grahams and Trix, were up 8 percent during the same period.

“Our cereal business has consistently strengthened throughout the year,” Powell said.

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