General Mills today (17 December) lowered its forecasts for annual sales and earnings on the back of lower sales in the second quarter, when the US group’s domestic performance was subdued.

Ken Powell, chairman and CEO of the Cheerios and Haagen-Dazs maker, insisted the company’s results for the 13 weeks to 29 November meant the business was “in line with our expectations” for the first half of the year.

Alongside the results, General Mills upped its target for cost savings, which it has re-set to US$500m by 2018.

The new forecasts include for full-year net sales, when measured on a constant-currency basis, to fall at a “low single-digit rate” compared to the previous 12 months, which did include a 53rd week. In September, the Old El Paso owner had forecast sales would “essentially match” the year before.

General Mills now believes its segment operating profit will “essentially match” the year earlier, down from its previous forecast for growth in the low single-digits.

Constant-currency adjusted diluted earnings per share are expected to grow, increasing at a low single-digit rate. In September, General Mills forecast growth at a mid single-digit rate.

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Powell said General Mills was “on track to deliver the targets we outlined at the beginning of the year, adjusting for the Green Giant sale”. 

He added: “Our emphasis on consumer first drove positive results in a number of categories and markets, and we plan to expand the impact more broadly in the second half in order to strengthen our retail sales performance.”

Second-quarter net sales declined 6% to $4.42bn. Foreign exchange reduced net sales by four percentage points. Pound volumes hit the top line by three points, while the combination of the sale the Green Giant business in November and the acquisition of Annie’s last October 2014 lowered net sales by one point.

General Mills reported a 4% fall in US retail sales to $2.76bn due to lower pound volumes. The company’s snacks and baking product units each saw sales dip 1%, while its other divisions reported “mid single-digit” declines.

General Mills’ international businesses saw sales fall 12%, although on a constant-currency basis, sales increased 3%.

Operating profit stood at $905.7m, against $559m a year earlier when the company booked restructuring, impairment and exit costs of $214.6m.

Net earnings were up 53% at $529.5m.