Inflation has proven stronger for General Mills than for Pillsbury’s cinnamon rolls.
Still, the Golden Valley-based food maker has again raised its near-term financial outlook, beating analysts’ expectations in the most recent quarter, despite a 16% decline in earnings.
CEO Jeff Harmening told analysts on Thursday morning, “Consumers are looking pretty strong and at the same time eating at home more than they did pre-pandemic.” We plan to continue this momentum by further investing in , innovation and capabilities.”
Here are four takeaways from Thursday’s earnings calls from the makers of Cheerios, Blue Buffalo, and Yoplait.
‘Mid-single-digit inflation’ in FY2024
General Mills expects input costs to ultimately rise 15% for the fiscal year ending May. Inflation will improve significantly next year, into the mid-single-digit range, business executives said.
But Harmening warned that a “normal” inflation environment is at least 12 months away.
Higher wages and higher costs from suppliers are expected to drive continued cost increases. This can lead to lower sales volumes and further price increases to maintain revenue growth and profit margins.
Chief Financial Officer Kofi Bruce said in an interview that the company will focus first on efficiency and cost savings, paying attention to consumer value when considering changes in pricing, promotions and package sizes. rice field.
“We didn’t choose these operating conditions — who would? — but what matters is how you stand up in the moment and what you’re ready to do,” he said. rice field. “We are not fully operational, but we operate more competitively than our competitors.”
No private label worries
The company’s management has brushed off concerns that consumers will switch to store brands to save money in the face of stubbornly high inflation.
“We have a strong brand first,” Harmening said, with limited exposure to private-label competitors. The company has also spent significantly more money on marketing in recent months.
“If you invest through this cycle, you will get better results on the other side,” Bruce said.
During the 2008 recession, the company was able to maintain market share in many categories when private label got a big boost.
John Nudy, president of retail in North America, said brands and businesses with lower market share would be hit harder as shoppers switch to private labels.
International Häagen-Dazs recall costs
A pint of Haagen-Dazs ice cream made in France was removed from shelves around the world last year due to possible pesticide contamination.On Thursday, General Mills estimated the recall cost $26 million.
Dozens of countries, from Ireland to the Philippines, have recalled several flavors of ice cream brands due to the possible presence of the carcinogen ethylene oxide. The chemical, found in trace amounts in certain lots of ice cream, is used as an insecticide or fungicide and is banned in the European Union.
In a previous news release, General Mills said, “No products sold in the United States using another supplier are involved in this recall.”
Sales increase, profit decrease
General Mills’ quarterly earnings fell 16% to $553 million this winter, while sales increased 13% year-over-year.
Adjusted earnings per share were 97 cents, beating analyst expectations by 5 cents.
“We had a great quarter and we had a lot of momentum across the board,” Bruce said, pointing to a resurgence in the foodservice business and a rebound in pet sales after destocking.
Revenue for the third quarter, December through February, was $5.1 billion.
The company’s shares rose nearly 3% on Thursday to close at $82.15. It has traded as high as $88.34 and as low as $64.42 over the past 52 weeks.