General Mills today (18 March) posted lower nine-month sales and profits amid signs the US group's domestic business remains under pressure.
For the nine months ended 22 February, net income dropped 27.1% to US$1bn. Operating profit fell 27.3% to $1.7bn on higher restructuring, impairment and other exit costs. Sales fell 2.2% to $13.3bn.
For the third quarter, net income slid 16.4% to $343.2m, although lower taxes led General Mills' earnings per share to beat analyst forecasts by three cents to $0.70.
Operating profit declined 19.9% to $537.2bn, in line with analyst expectations.
Net sales decreased 0.6% to $4.4bn. Net sales from General Mills' US retail business did increase 1% but felt the benefit of price increases. Volumes fell 2%.
General Mills said its yoghurt and snacks operating units "drove the quarterly net sales increase".
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In a note to investors, Sanford Bernstein analyst Alexia Howard wrote: "Despite improvement in areas
including cereals, General Mills' core U.S. Retail business remains lacklustre, with volume down by three points, excluding Annie's.
"We believe that top-line weakness in the US& retail segment in centre-of-plate categories, including baking mixes, meals and frozen vegetables is likely to continue as consumers shift into fresher foods and smaller brands with simple ingredients. While the acquisition of Annie's is a step in the right direction, given its more natural and organic positioning, it is still too small to make a huge difference."
She said General Mills international, convenience stores and foodservice units "are holding up well" and added: "We could likely see more acquisitions on the international front. More cost cutting and cash returns to shareholders could be the focus to counterbalance weak top-line growth and operational deleveraging."