New CEO vows to take steps to restore growth; shares rise as results beat expectations
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the US print edition of The Wall Street Journal (June 29, 2017).
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General Mills Inc.'s new chief executive said he would invest in turning around declining sales as the struggling yogurt business continues to weigh on the company.
General Mills said revenue fell short of its standards as sales declined for the eighth straight quarter.
On an earnings call with investors, CEO Jeff Harmening said much of General Mills' struggles in the past year were "self-inflicted," through missteps like a lack of innovation in yogurt and pricing its products too high.
"The vast majority of our challenges are correctable, both in the U.S. and other places," he said. The company is working to improve its 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 rose 2.7% in early 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 exclude 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.
Mr. Harmening recently took the top job at General Mills after completing a transition plan where he pushed deals that targeted consumers' 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 has said previously that declines in light and Greek yogurt varieties were hurting results, along with a gap in promotional levels between General Mills and its competition. This week the company introduced "French-style" yogurt to try to boost the category. The new, thick yogurt is cultured for eight hours in the small glass jars it is sold in, and doesn't contain artificial flavors or preservatives.
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.
--Annie Gasparro contributed to this article.
Write to Austen Hufford at email@example.com
(END) Dow Jones Newswires
June 29, 2017 02:47 ET (06:47 GMT)