General Mills Sales Slump in North America -- WSJ
September 19 2018 - 3:02AM
Dow Jones News
By Annie Gasparro and Allison Prang
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 19, 2018).
General Mills Inc. is struggling to revive sales in the U.S. as
growth in its new pet-food business slows.
The food maker's sales rose 8.6% to $4.09 billion in the latest
quarter, driven by international revenue. General Mills' sales in
its main North American market dropped 2.1% to $2.39 billion, more
than analysts expected. Shares, down 19% year to date, were off
7.9% at midday Tuesday.
The Minneapolis-based conglomerate has tried to offset stagnant
sales with a move into high-end pet food, a business that is
expanding rapidly compared with packaged, process food. General
Mills completed the acquisition of Blue Buffalo for $8 billion in
April and has focused since on getting the pet food into more
stores.
General Mills' pet-food sales rose 14% in the latest quarter to
$343.4 million on a comparable basis. Sales at retailers increased
9%. That is faster sales growth than for the company's main
packaged foods, but a slowdown from Blue Buffalo's sales when
General Mills agreed to buy it in February.
"If all my businesses had decelerated to 9% growth, I'd be in
pretty good shape," Chief Executive Jeff Harmening said in an
interview.
General Mills executives said new products, stronger marketing
and wider distribution will help the company meet the high
expectations that investors have for the pricey acquisition.
General Mills is expanding Blue Buffalo from distribution primarily
at pet stores to supermarkets and mass retailers.
"We still only have 3% household penetration among pet parents,"
Mr. Harmening said. "We have a lot of room to expand."
The bet on pet food comes after years of pressure on General
Mills' cereal and yogurt businesses, as consumers abandoned those
products for newer brands or other breakfast foods that seem
fresher and healthier.
U.S. snack sales for General Mills fell 4% in the latest
quarter, while sales of yogurt such as Yoplait declined 2%, as did
sales of meals and baking products such as Betty Crocker cake mix.
U.S. sales of cereal brands such as Cheerios and Lucky Charms, rose
1%.
"As industry trends improve, we've seen our competitiveness
improve," Mr. Harmening said.
General Mills' total organic net sales, which take out impacts
from things such as changes in foreign-exchange rates, rose 0.5% in
the quarter.
General Mills has also raised prices this year to make up for
rising transportation and ingredient costs that have hit the
industry. Profit declined as net interest climbed more than 80%
from the comparable quarter a year earlier because of the Blue
Buffalo deal.
The company reported earnings of $392.3 million, down 3.1% from
the comparable quarter a year earlier. On an adjusted basis, the
company reported earnings of 71 cents a share, above analysts'
estimates of 64 cents.
Write to Annie Gasparro at annie.gasparro@wsj.com and Allison
Prang at allison.prang@wsj.com
(END) Dow Jones Newswires
September 19, 2018 02:47 ET (06:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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