On the money: General Mills eyes US retail volume improvement
General Mills CEO Ken Powell sounded an upbeat note on the firm's earnings call yesterday
General Mills said it expects to see its US retail volumes improve as consumer pricing moderates over the course of the year.
The company yesterday (19 September) reported a 35% rise in net income for its first quarter to US$548.9m on the back of acquisitions and sales growth in Europe and Canada.
However, the Minneapolis-based company said US retail sales had fallen by 1% to $2.49bn, with operating profit down by 2% at $575m and retail pound volume down 2%.
Despite the declines, CEO Ken Powell sounded an upbeat note on the firm's earnings call yesterday and told analysts the company is seeing pricing moderate and volumes improve across its US retail categories as it begins to lap last year's "significant" price increases.
"We have a number of new products that we're going to be launching, as you know, and the early returns on those is that they're going to be good contributors. So we are expecting our volume in sales trends to improve somewhat in US retail over the course of the year, and we're very much expecting that to happen."
He added: "We still expect inflation in 2013, but at a rate well below the 10% we experienced in 2012. So we do anticipate a more stable food price environment for consumers as we go forward."
CFO Don Mulligan said General Mills had reported 2% volume growth in its bakeries and foodservice divisions, offset by some index pricing that he said "will unfold differently".
"What we're talking about is turning our US, our old business, from what was negative 4% and 5% growth last year for volume up to flat and slightly positive as the year unfolds."
Barclays Capital analyst Andrew Lazar noted the relatively flat volumes, but sounded an optimistic note for the remainder of the year.
"While below the line items aided fiscal 1Q results, EBIT growth was ahead of Street forecasts, though partially due to lower advertising spend in the quarter, which will ramp up in fiscal 2Q. But, better than forecast International results are helping and performance should improve sequentially from here."
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