General Mills Inc.'s new chief executive said he would invest in turning its sales declines around as struggling yogurt sales continue to weigh on the company.
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Revenue "fell well short of our standards," Chief Executive Jeff Harmening said in a statement. "Our entire organization is moving with urgency" to improve sales trends.
The Minneapolis-based food giant also acknowledged that margin growth would suffer as it invests in efforts to restore sales growth.
Still, shares were flat in premarket trading as the company's latest quarterly results beat Wall Street expectations.
Gross margin fell to 34.7% in the quarter from 35.1%, as unfavorable commodity impacts offset cost savings.
The company expects organic net sales, which excludes currencies and deals, to continue to fall in the new fiscal year, declining 1% to 2% in all. Organic sales fell 3% in the company's just-completed fourth quarter.
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Mr. Harmening recently took the top job at General Mills after completing a transition plan where he pushed deals that targeted consumer's hunger for fresh and natural foods.
The industry has been working to adapt to consumers who are increasingly looking for healthier and fresher brands.
Lower food costs and other savings helped General Mills and its peers deliver solid earnings on lower revenues for a time. Now sales declines are catching up with them, and falling food prices are sparking price wars on some products.
In the quarter, General Mills' North American retail sales fell 3%, driven by a double-digital fall in yogurt.
General Mills in recent years has made Cheerios gluten-free, removed artificial colors from Trix cereal, bought Annie's Homegrown natural and organic snacks, and removed aspartame from Yoplait Light.
The company also raised its dividend by 1 cent to 49 cents, the smallest increase since 2010.
In all, for the quarter that ended May 28, General Mills reported net income of $408.9 million, or 69 cents a share, up from $379.6 million, or 62 cents a share, in the year-ago period.
Revenue fell 3.1% to $3.81 billion.
Analysts polled by Thomson Reuters expected per-share profit of 71 cents and revenue of $3.75 billion.
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(END) Dow Jones Newswires
June 28, 2017 08:19 ET (12:19 GMT)