By Chelsey Dulaney
General Mills Inc. on Wednesday reported weaker-than-expected
revenue in its May quarter, as the food maker continues to struggle
with changing consumer tastes and a strong dollar.
Profit excluding one-time items came in above Wall Street
expectations for the fiscal fourth quarter, while the company also
saw its volume improve.
In a news release, Chief Executive Ken Powell called the
company's operating performance in its recently ended fiscal year
"mixed." Though General Mills' convenience stores and food-services
segment has logged sales growth, its largest segment, U.S. retail,
has struggled.
The maker of Cheerios cereal and Hamburger Helper has been
cutting jobs and closing plants as it struggles with Americans'
growing aversion to packaged foods. General Mills said Wednesday
that it expects its cost-cutting efforts to save $$285 million to
$310 million in its new fiscal year.
The company forecast a mid- to single-digit increase in adjusted
earnings for the 2016 fiscal year, excluding currency fluctuations,
and flat sales growth compared with the prior year. Analysts polled
by Thomson Reuters had recently forecast a 4% increase in per-share
earnings and a 1% uptick in sales for the year.
The Minneapolis-based company isn't alone--established
food-and-beverage-industry peers such as Kellogg Co. and Coca-Cola
Co. are also grappling with lagging demand for their shelf-stable
foods and sugary drinks, as people favor healthier, fresher
options.
In June, General Mills announced plans to strip artificial
flavors and colors from the remaining 40% of its cereals that still
contain them, including Trix and Reese's Puffs.
Meanwhile, the company continues to benefit from its acquisition
of organic-food company Annie's Inc., which it bought last year for
$820 million.
"Our actions to respond to evolving consumer food
interests--including bolstering our natural and organic portfolio
with the addition of Annie's--helped strengthen our business
performance in the second half of the year," said Mr. Powell.
In the latest quarter, U.S. retail sales grew 4.6% to $2.55
billion, helped by higher volume and net-price realization.
In its international segment, sales fell 8.8% to $1.22 billion
on currency effects, which brought down sales growth by 18
percentage points.
Convenience stores and food-service-segment sales grew 3.9% to
$527.5 million.
In all, General Mills reported a profit of $186.8 million, or 30
cents a share, down from $404.6 million, or 65 cents a share, a
year earlier.
Profit in the latest quarter was hit by a $260 million
impairment charge. General Mills said it redirected resources away
from supporting its Green Giant business segment, which caused it
to review the business and determine it wasn't worth what it once
was.
Excluding the impairment, restructuring costs and a tax item,
earnings were 75 cents a share.
Revenue ticked up 0.4% to $4.3 billion. Excluding currency
fluctuations, sales would have increased 6%.
Analysts polled by Thomson Reuters expected a per-share profit
of 71 cents and revenue of $4.53 billion.
Gross margin improved to 35.3% from 34.6% in the prior year.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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