Yoghurt troubles continue to sour sales and profits at General Mills.
The food giant saw its shares slide 3.5 per cent on Tuesday after it announced quarterly earnings that missed Wall Street’s estimates, as demand for its Yoplait yoghurt slumped.
The company – known for a range of food products from cereal to tortillas – said that net retail sales in its largest market, the US, were down 9 per cent during the quarter ending November 27. Improving sales for its Annie’s natural and organic products, Old El Paso line of Mexican food and Totino’s frozen hot snacks were not enough to offset the 18 per cent fall in sales of Yoplait yoghurt products, and declines in Pillsbury refrigerated dough and Progresso soups.
International sales were also down by 4 per cent from the same period a year ago, General Mills said, with the strong dollar cutting into the value of its overseas sales.
General Mills reported an overall 7 per cent decrease in net sales compared to a year earlier, to $4.1bn, short of analysts’ expectations of $4.22bn in revenue. Net income for its fiscal 2017 second quarter came in at $481.8m, a 9 per cent fall year-on-year and shy of the $523.16m that analysts had expected. That translated to diluted earnings per share of 80 cents, 8 per cent lower from the year-ago period and also short of Wall Street’s forecast of 85.8 cents per share.
During a conference call with investors, General Mills executives said they hoped to stem the declines by focusing on its “consumer first” strategy of identifying and catering to shoppers’ shifting preferences for more natural meals and snacks. General Mills’ chief executive Ken Powell blamed in part “weakening food industry trends” for the lacklustre results, and said the company was making “targeted adjustments” to its plan for the second half of fiscal year 2017 to improve its topline performance.
In particular, chief operating officer Jeff Harmening said that the company has “a good deal of work to do to turn around our yoghurt business,” and while some improvement is expected in the back half of the year, it’s unlikely to return to growth. “We believe the key to success will be fundamentally shifting our portfolio through renovation and innovation to give consumers what they want from their yoghurt, and that’s the essence of ‘consumer first,’” he said.
General Mills is in the midst of efforts to streamline its global operations and supply chain network. By the end of fiscal year 2018, the company plans to have closed 11 plants and reduced approximately 5,000 positions worldwide. On Tuesday it said it was lowering its target for organic net sales growth, from its previous range of a 0-2 per cent decline to 3-4 per cent decline over the full fiscal year 2017.
From a year ago, General Mills shares have gained about 6.15 per cent.