General Mills’ fiscal second-quarter net profit dropped by 37 percent, as weak demand continued to gnaw at the big packaged-food maker.
Its adjusted operating profit, which excluded restructuring expenses, was above analysts’ estimates.
General Mills posted net earnings of $346.1 million, or 56 cents per share, for the quarter ended Nov. 23. Stripping out restructuring expenses, General Mills had earnings per share of 80 cents, down from 83 cents a year ago, but above the 77-cent consensus forecast from analysts polled by Thomson Reuters.
The Golden Valley, Minn.-based company recorded sales of $4.71 billion, down 3 percent from a year ago and short of analysts’ estimate of $47.9 billion. When adjusted for unfavorable foreign-currency fluctuations, sales were still down 1 percent over a year ago.
Like many packaged-food makers, General Mills has been struggling with soggy sales, a product of the sluggish economic recovery and changing consumer tastes. On Nov. 7, the company sharply lowered its sales and profit outlook, citing weak industry trends.
“The second quarter was really right in line with the November revision in pretty much every way,” General Mills CEO Ken Powell said in an interview with the Star Tribune.
Jack Russo, a stock analyst at Edward Jones, said it was “good to see that business conditions did not get any worse.”
But the food industry’s woes remain. “Challenges are many, as consumers remain frugal in their spending, competition in packaged food is intense and international markets are slowing,” Russo said.
On the international front, General Mills sales — adjusted for unfavorable currency moves — were up 3 percent. But the division’s operating profits were down 2 percent in constant currency. The company’s sales fell 7 percent in Canada, reflecting a fire that disrupted Green Giant vegetable production at a contract manufacturer.
General Mills’ U.S. retail sales were $2.86 billion, down 4 percent from a year ago, as sales volume sagged. The segment’s operating profit fell 10 percent.
Sales of cereal, General Mills’ largest U.S. business, dropped 5 percent from a year ago, as the cereal business generally continued to deteriorate. The U.S. meals division saw a 7 percent decline as Hamburger Helper’s 2013 makeover hasn’t taken hold. Sales of baking products fell 5 percent as a key competitor cut prices.
However, Yoplait sales were up 1 percent, a second consecutive quarter of sales growth after three years of decline. And General Mills’ vibrant snacks division, home to its Nature Valley and Fiber One bars, posted 2 percent sales growth.
To deal with weak sales, Mills is in the midst of a significant restructuring.
In September, it announced the closing of two plants, one each in California and Massachusetts, erasing about 575 jobs. In October, it said it would also cut 700 to 800 mostly white-collar jobs.
Those cost-cutting initiatives, along with new products and new marketing efforts, should boost the company in the second half of its fiscal year, Powell said in a statement.
“The operating environment remains challenging, but as we move into the second half of our fiscal year, we expect to renew sales and profit growth.”
On Wednesday, General Mills stock closed up $1.06, or 2.1 percent, at $52.19.