Pricing Issues Hurt General Mills In Its Q3
General Mills’ streak of sales declines extended to a third-straight quarter as items from the food giant’s Yoplait, Pillsbury and Hamburger Helper brands failed to land in shopping carts.
Poor pricing of its products was a key factor to the Golden Valley-based company’s 5 percent drop in revenue year-over-year for the three-month period ending February 26. “We just missed this year,” General Mills chief operating officer Jeff Harmening told the Wall Street Journal. “Our pricing wasn’t in line with the marketplace.”
In the U.S., which made up two-thirds of the company’s sales last year, sales fell in all of its major product divisions. Yogurt took its biggest hit ever as sales fell 20 percent from a year ago, followed by its Meals & Baking unit (down 10 percent), Snacks (4 percent) and Cereal (1 percent).
Altogether, its U.S. business slumped 7 percent during the winter months as revenue totaled $3.79 billion. Analysts polled by Zacks Investment Research expected $3.82 billion.
Its adjusted earnings per share outcome, on the other hand, beat Wall Street’s estimate. General Mills posted an 11 percent gain in this category compared to the year-ago period with adjusted earnings of 72 cents per share. This edged past the 71 cents analysts predicted.
A $78 million restructuring charge related to international factory closings otherwise dented its profit potential in the third quarter. The company ultimately earned $358 million, largely due to an improved operating margin (up from 15.9 percent a year ago to 16.9 percent).
“Looking ahead, we are highly focused on improving our topline performance while continuing to expand our margins,” General Mills CEO Ken Powell said in a statement.” We’ve added support in the fourth quarter to strengthen key business lines, and we’re pursuing global growth priorities that will further improve our sales trends beyond fiscal 2017.”
Over the last several years, General Mills has made numerous adjustments to its carb-heavy portfolio as it pursues health-conscious consumers. Among its long list of changes include the removal of artificial flavors and colors from its cereal brands and the acquisition of, or investment in, organic food companies like Annie’s. Twin Cities Business analyzed General Mills’ shifting diet in its March 2016 issue.
Investors were unmoved by General Mills’ third quarter report. Shares of the company were nearly flat with its Monday closing price of $60.26.