GIS General Mills Inc

By Joshua Jamerson 

General Mills Inc. said sales of Yoplait yogurt and Progresso soup suffered in the latest quarter because they were priced higher than competing brands.

"We just missed this year," Chief Operating Officer Jeff Harmening said in an interview. "Our pricing just wasn't in line with the marketplace."

The Minneapolis-based food giant gave a grim outlook for comparable sales for the rest of its fiscal year ending in May. That metric fell 5% in the recent period, marking nine months of steady erosion.

Lower food costs and other savings helped General Mills and its peers deliver solid earnings on the lower revenues for a time. Now sales declines are catching up with them, and falling food prices are sparking price wars on some products.

In its fiscal third quarter, General Mills' North American retail sales fell 7%, dragged down by meals like Hamburger Helper, baking products like Pillsbury refrigerated dough, and Yoplait.

The decline was larger than Wall Street expected, and shares fell about 2% Tuesday morning before recovering. The shortfall underscored the company's struggle to win over consumers who are increasingly looking for healthier and fresher brands.

General Mills in recent years has made Cheerios gluten-free, removed artificial colors from Trix cereal, bought Annie's Homegrown natural and organic snacks, and removed aspartame from Yoplait Light. But Bernstein analyst Alexia Howard said concerns about added sugar and artificial sweeteners may partly explain General Mills' continued problems in the yogurt aisle.

Mr. Harmening said competition over prices was a bigger problem than the shift to healthier foods.

"I don't think that has been the biggest issue we've had over the past year. It's been the competitiveness of our pricing," he said.

General Mills doesn't want its brands to be the cheapest, but it does have to do a better job of getting stores to offer it a "fair share" of holiday promotions, executives said.

Overall, for the quarter that ended Feb. 26, General Mills reported net income of $357.8 million, down 1.1% from $361.7 million in the year-ago period. Revenue fell 5% to $3.79 billion, lower than analysts' estimates of $3.82 billion.

General Mills also booked $78 million in restructuring and impairment charges, which dented profit. Excluding restructuring and other charges, the company's adjusted profit rose 10.8% to 72 cents a share from a year ago. Analysts polled by Thomson Reuters expected per-share profit of 71 cents.

Write to Joshua Jamerson at joshua.jamerson@wsj.com

(END) Dow Jones Newswires

March 21, 2017 12:44 ET (16:44 GMT)

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