Cost inflation, soft sales stagnate General Mills

by Monica Watrous
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MINNEAPOLIS — Cost inflation, soft U.S. retail sales and a strong prior-year performance led to slow second quarter for General Mills, Inc.

“The second quarter was a difficult comparison to strong prior-year sales and earnings results for our businesses,” said Ken Powell, chairman and chief executive officer. “In addition, the period included the highest quarterly input cost inflation we expect to see this fiscal year, and food and beverage industry sales in the U.S. and other developed markets slowed a bit during the quarter.  Even so, our bottom-line results through the first half of the year are broadly consistent with our plans.”

For the quarter ended Nov. 24, net earnings attributable to General Mills increased 1.5% to $549.9 million, equal to 87c per share on the common stock, up from $541.6 million, or 84c per share, during the same prior-year period.

Net sales dipped slightly to $4,875.7 million from $4,881.8 million last year.

For the first half of fiscal 2014, net earnings attributable to the company totaled $1,009.2 million, or $1.58 per share, down from $1,090.5 million, or $1.68 per share, during the same period last year. Net sales advanced 3.5% to $9,248.4 million from $8,932.8 million.

New products, including Yoplait blended Greek yogurt, Old El Paso stand-and-stuff flour tortillas and Nature Valley Protein granola cereal, contributed to a modest sales growth in the first half of the fiscal year for General Mills, Inc. Established brands, including Chex and Cinnamon Toast Crunch cereals, Progresso soups and Totino’s frozen pizza and snacks also helped sales.

For the U.S. retail segment, second-quarter operating profit fell 6% to $682 million. Sales declined 1% to $2.97 billion from last year.

Operating profit for the convenience stores and food service segment dropped 12% to $85 million. Sales slid 2% to $507 million, due to negative net price realization and mix.

International segment operating profit during the quarter climbed 10% to $153 million, led by sales growth in China, Canada and Brazil. Net sales for the segment grew 2% to $1.4 billion.

“As we enter the second half of fiscal 2014, we expect our earnings growth to accelerate from first-half levels,” Mr. Powell said. “We like our 2014 innovation and marketing plans, which include a strong slate of new items being introduced in the second half of the year. We expect our rate of input-cost inflation to ease in the second half. And last year’s growth was weighted toward the first half, making our second-half comparisons easier.”
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