General Mills Inc. raised revenue expectations after U.S. sales of its snacks and cereal improved in the latest quarter.
The maker of Cheerios and Hamburger Helper has struggled as consumers shy away from processed foods. Missteps with brands like its Yoplait yogurt also have dragged down sales in recent years.
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Chief Executive Jeff Harmening, who assumed that role in June, said stronger innovation and better marketing helped General Mills gain market share. U.S. cereal sales increased 7% and U.S. snacks sales rose 5% in the latest quarter, helped by new Chocolate Peanut Butter Cheerios and Nature Valley granola bars.
General Mills now expects comparable sales for the year ending in May to be flat to down 1%, from an earlier estimate of down 1% to 2%. Shares were up slightly in premarket trading Wednesday.
Mr. Harmening, who was previously chief operating officer and head of the North America business, made reviving General Mills' cereal and yogurt businesses his top priorities. Mr. Harmening has said consumer priorities have shifted from weight management to simpler ingredients, hurting brands such as Yoplait.
The company is adjusting its recipes to meet the new demands, but its latest results also underscore a persistent desire for indulgent treats. Classics like Lucky Charms and Cinnamon Toast Crunch have sold better recently, even though they are sugary and considered unhealthy by many.
General Mills yogurt sales were still down 11% in North America, but that marks a major improvement from the summer. Mr. Harmening said new French-style yogurt, Oui by Yoplait, which is sold in glass jars with no artificial ingredients, has helped.
General Mills' revenue rose 2.1% in the second quarter to $4.2 billion. Profit for the quarter ended Nov. 26 fell to $430.5 million from $481.8 million the prior year. But excluding one-time items, adjusted earnings of 82 cents matched analysts' expectations according to FactSet, while revenue results topped their projection.
Allison Prang contributed to this article.
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General Mills Inc. said its snack and cereal sales are improving in the U.S. as more people nibble throughout the day in place of larger meals.
Stronger sales in General Mills' second quarter marked important progress for a company that has struggled in recent years as older brands like Betty Crocker and Hamburger Helper fell out of favor and newer products like Yoplait yogurt lost market share to rivals.
Chief Executive Jeff Harmening said new products and better marketing helped General Mills in the quarter, as did the consumer shift toward snacking. In the U.S., the company's sales of cereals like Chocolate Peanut Butter Cheerios rose 7%, and sales of snacks like Nature Valley granola bars rose 5%.
"People are snacking more," Mr. Harmening said in an interview, adding that General Mills believes 30% of cereal in the U.S. is eaten as a snack rather than a meal, up from 10% a decade ago.
"It's probably one of the reasons our cereals that taste really good are the ones that growing," he said. Sweeter, classic cereals like Lucky Charms and Cinnamon Toast Crunch are driving General Mills' sales, while its Fiber One brand struggles.
Campbell Soup Co. and Hershey Co. also moved deeper into snacks this week. Campbell said it plans to buy Snyder's-Lance and Hershey said it would buy Amplify Snack Brands, the biggest acquisitions in the centurylong history of both companies.
General Mills could make more acquisitions, Mr. Harmening said. It has bought Annie's Homegrown and Epic meat bars in recent years. He said, though, that such deals aren't the only way to generate sales. "We don't feel pressure to do M&A just because all the other kids are doing it," he said.
Mr. Harmening, who was chief operating officer and head of the North America business before becoming CEO in June, has said he wants to revive General Mills' cereal and yogurt businesses. General Mills has reworked recipes and introduced products like a French-style yogurt, Oui by Yoplait, which is sold in glass jars with no artificial ingredients. General Mills' yogurt sales were still down 11% in North America in the latest quarter, but that was a big improvement from the summer.
General Mills now projects comparable sales for the year ending in May to be flat to down 1%, from an earlier estimate of down 1% to 2%. The company's stock traded roughly flat on Wednesday at about $58 a share.
Overall, General Mills' revenue rose 2.1% in the second quarter to $4.2 billion. Profit for the quarter ended Nov. 26 fell to $430.5 million from $481.8 million the prior year. Excluding one-time items, adjusted earnings of 82 cents matched analysts' expectations according to FactSet, while revenue results topped their projection.
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(END) Dow Jones Newswires
December 20, 2017 12:34 ET (17:34 GMT)