US food group General Mills has downgraded its fiscal 2024 sales forecast and warned of a slower-than-expected recovery in demand.

Releasing its second-quarter financial results today (20 December), the Haagen-Dazs and Cheerios owner revealed net sales were down 2% year-on-year to $5.13bn.

In light of the slowdown, General Mills is now forecasting fiscal 2024 organic net sales between down 1% and flat, compared to a year earlier. It had previously forecast growth of 3% to 4%. Analysts had expected growth of 2.4%.

In June, the company said that most of the price hikes it had implemented to aid margin recovery had been done.

But the increased elasticity it noted at that point appears to have continued with consumers taking longer than expected to switch back from cheaper private-label offerings to brands.

Speaking today, General Mills CEO Jeff Harmening said: “For the full year, we’ve revised our top-line outlook to account for a slower volume recovery, narrowed our profit and EPS expectations within our original guidance ranges and maintained our outlook for strong free cash flow conversion.”

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He added: “We’re adapting our plans to the evolving consumer environment and staying focused on driving long-term growth, with a priority on winning through innovation, brand building, and in-store execution.”

On a more positive note, Harmening said: “While we saw a slower-than-expected volume recovery in the second quarter amid a continued challenging consumer landscape, we generated bottom-line growth thanks primarily to strong HMM [holistic margin management] cost savings.”

In the three months to 26 November, the cereal, snack bar and pet-food manufacturer saw its second-quarter operating profit increase by 2% year-on-year to $811.8m while higher pricing also helped gross margin rise 170 basis points. Net earnings fell 2% to $595.5m.

General Mills is now expecting fiscal 2024 adjusted operating profit and adjusted diluted EPS to increase 4% to 5% in constant currency, compared to the previous range of 4% to 6% growth, pointing to still-high input costs, primarily of labour.

The group reiterated it is executing its Accelerate strategy to “drive sustainable, profitable growth and top-tier shareholder returns over the long term”.

The strategy involves the company prioritising its core markets and “local gem brands” that have the best prospects for profitable growth.

It added it is committed to reshaping its portfolio with strategic acquisitions and divestitures to “further enhance its growth profile”.

Commenting on today’s results, John Baumgartner, an analyst with Mizuho Securities, said: “The weaker H2 guide will reinforce market concerns for [the] industry’s ability to remain disciplined on pricing and promotions.”

He added: “[The] upside to cost savings reinforces our thesis that industry margins have not peaked, but efficiencies [are] unlikely to offset revenue concerns.”

Shares in General Mills were down 3.09% at $64.65 at 10:43 GMT.