General Mills topped Wall Street expectations for quarterly sales and profit, benefiting from higher prices for its breakfast cereals, snack bars and pet food products that helped offset a slowing demand.
Shares of the Minnesota-based company, which have fallen more than 21% this year, rose about 1% in premarket trade, as it also reaffirmed its annual sales and profit targets.
Packaged food makers have hiked product prices multiple times over the past year, in a bid to counter the spiralling impact from higher labour, stronger dollar and raw material costs, even as some of these expenses have now eased from their peaks.
While this has bolstered top-line as well as margin growth for staple food companies, volume has taken a hit with customers becoming less willing to spend on more expensive food items and shifting to cheaper private-label alternatives.
General Mills' gross margin rose 540 basis points to 36.1% in the first quarter. Its organic average selling prices rose 7 points, while organic volumes were down 2 points.
Organic net sales at North America retail segment grew 4% as it saw a 'modest' inventory rebuild at some retailers in the quarter after being hit by weaker demand in the previous quarter.
Its pet food segment logged flat organic net sales as customers shifted towards more value-oriented products as well as smaller pack sizes.
The Cheerios cereal maker reported net sales of $4.91 billion (€4.6 billion) in the first quarter compared with analysts' expectations of $4.88 billion (€4.6 billion), according to LSEG data.
Excluding one-off charges, General Mills earned $1.09 per share, compared with estimates of $1.08.
"We delivered growth on the top and bottom lines in the first quarter amid an evolving external environment characterised by moderating inflation, stabilising supply chains, and a resilient but increasingly cautious consumer," said General Mills chairman and chief executive officer Jeff Harmening.
"Looking ahead, we will remain focused on executing our Accelerate strategy and driving strong growth for our brands. With confidence in our plans and our ability to adapt to continued change in the consumer landscape, we are reaffirming our guidance for fiscal 2024."
News by Reuters, additional reporting by ESM.