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General Mills Cuts Annual Sales Forecast On Slowing Demand

By Reuters
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General Mills Cuts Annual Sales Forecast On Slowing Demand

General Mills has cut its annual sales forecast, hurt by slowing demand for its higher-priced breakfast cereals, snack bars and pet food products.

Its shares were down about 4% in premarket trading as the Cheerios cereal maker also lowered the upper end of its annual adjusted profit growth forecast to between 4% and 5% due to still-high input costs, primarily of labour.

Elevated interest rates and sticky inflation are prompting consumers to opt for pantry staples from cheaper private-label alternatives to pricier national brands such as General Mills and Conagra Brands.

series of price hikes, undertaken to offset steep input costs, have also pushed consumers to shop smaller pack and basket sizes.

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Overall volumes in its North America retail segment fell five percentage points, while net sales were down mid-single digits for US snacks like Nature Valley and its breakfast cereals including Cheerios and Cinnamon Toast Crunch.

Performance Highlights

General Mills' net sales fell 2% to $5.14 billion (€4.7 billion) in the second quarter, below estimates of $5.35 billion.

Operating profit amounted to $812 million (€741.9 million), up 2% year on year, while adjusted operating profit increased 13% in constant currency to $989 million (€903.7 million).

General Mills chair and chief executive officer, Jeff Harmening stated, “While we saw a slower-than-expected volume recovery in the second quarter amid a continued challenging consumer landscape, we generated bottom-line growth thanks primarily to strong HMM (Holistic Margin Management) cost savings.”

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In the first half, the company saw net sales growth of 1% to $10.0 billion (€9.14 billion), driven by favourable net price realisation and mix, partially offset by lower pound volume.

Operating profit for the period declined 8% year on year to $1.7 billion, while adjusted operating profit increased 7% year on year to $1.9 billion.

'Long-Term Growth'

Harmening added, “We’re adapting our plans to the evolving consumer environment and staying focused on driving long-term growth, with a priority on winning through innovation, brand building, and in-store execution.

“At the same time, we’re stepping up our HMM performance and further eliminating disruption-related costs in the supply chain.”

News by Reuters, additional reporting by ESM.

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