Shares of General Mills Inc. (NYSE: GIS) got crunched Wednesday morning after the Cheerios maker turned in another underwhelming earnings report. Sales in its yogurt division, which includes the Yoplait brand, were down by double digits, and cereal sales fell 7%. The stock was down 5.6% as of 12:21 p.m. EDT.
Continue Reading Below
General Mills has been experimenting with new products, such as Oui by Yoplait, a French-style yogurt, in order to pump up sales, but those efforts have not been successful. Organic sales for fiscal Q1 (a statistic that strips out the effect of acquisitions) were down 5% in North America, and overall sales were off 3.5% in the period to $3.77 billion, coming up short of analysts' consensus estimate of $3.79 billion.
On the bottom line, adjusted EPS fell 9% in constant currency to $0.71, missing expectations of $0.76 as adjusted gross margin fell 230 basis points to 35.1%.
CEO Jeff Harmening said sales were in line with expectations, and the company's "number one priority is strengthening our top-line performance."
Management was optimistic that performance would improve over the rest of fiscal 2018, calling for organic net sales to fall by 1% to 2% for the year, an improvement relative to fiscal 2017's 4% drop. It also anticipates margins improving and EPS increasing 1% to 2% from last year's $3.08 result. Both of those forecasts were within the range of analysts' estimates.
General Mills remains a solid dividend payer, but its shares are down about 40% since last July. The challenges it faces are the same ones affecting the broader packaged food industry as consumers move away from products like breakfast cereal and canned soup and toward fresh, organic, and natural foods.
In this environment, General Mills stock is likely to continue to struggle.
10 stocks we like better than General MillsWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and General Mills wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of September 5, 2017