Increased investment in marketing, merchandising for US yoghurt to hit Q3 profit

Increased investment in marketing, merchandising for US yoghurt to hit Q3 profit

General Mills has warned that third-quarter earnings are likely to miss market expectations as sales volumes declined 1% in the period.

In an update today (14 March), the company provided a guidance range of $0.61-0.62 for adjusted earnings per share, missing consensus expectations of $0.68 a share.

"Sales and operating profit for the third quarter ended 23 February will reflect approximately 1% lower volume, consistent with recent food industry trends in developed markets, as well as negative foreign currency translation effects," the company said.

General Mills added  its result will also be dented by a higher incremental marketing and merchandising spend in the US yoghurt category.

The Yoplait maker has been battling declining sales in an intensely competitive US yoghurt market, particularly in the high-growth Greek category. To date, the company said the response to these efforts has been "encouraging".

US retail operating profit is expected to be 10-11% below last year, when General Mills booked growth of 13%. Total segment operating profit is also expected to be "below" last year's "strong third quarter", the company revealed.

General Mills shares were down 1.82% to $50.05 at 16.00 (GMT)

The company is scheduled to report third-quarter earnings next week (19 March).

Show the press release

General Mills Updates Fiscal 2014 Outlook

, 2014 /PRNewswire/ -- General Mills (NYSE: GIS) said today that it continues to expect adjusted diluted earnings per share (EPS) for the fiscal year ending May 25, 2014, to total between $2.87 and $2.90 per share.  Adjusted diluted EPS excludes mark-to-market valuation effects for certain commodities and grain inventories; restructuring and other exit costs; and now also excludes the impact of changes in Venezuelan foreign currency policy.

General Mills said its sales and operating profit for the third quarter ended February 23, 2014, will reflect approximately 1 percent lower volume, consistent with recent food industry trends in developed markets, as well as negative foreign currency translation effects. In addition, results for the quarter include incremental consumer marketing and merchandising investment in the company's U.S. yogurt business, where response to-date has been encouraging.  Third-quarter operating profit for the company's U.S. Retail segment is expected to be 10-11 percent below strong year-ago results that grew 13 percent. Total segment operating profit is also expected to be below last year's strong third-quarter level. Adjusted diluted EPS for the fiscal 2014 third quarter are expected to total approximately $0.61-$0.62.

General Mills expects to record strong double-digit growth in adjusted diluted EPS in the fourth quarter of fiscal 2014, when the expected rate of input cost inflation, the quarterly tax rate, and the average number of shares outstanding will each be well below prior-year levels.

Consistent with General Mills strong operating cash flows, anticipated earnings growth in 2014, and continuing growth expected in fiscal 2015, the General Mills board of directors earlier this week declared an 8 percent increase in the quarterly dividend, payable May 1, 2014, to shareholders of record April 10, 2014. 

General Mills plans to report detailed third-quarter results on Wednesday, March 19.  In conjunction with that release, the company will conduct a conference call for members of the investment community, beginning at 8:30 a.m. eastern time.  The conference call will be webcast and can be accessed on the Internet at www.generalmills.com.

Original source: General Mills