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General Mills Plunges After Higher Costs Hit Profit Forecast

Published on Mar 21 2018 1:04 PM in A-Brands tagged: General Mills / Cheerios / Jeff Harmening

General Mills Plunges After Higher Costs Hit Profit Forecast

General Mills, after years of struggling to ignite sales growth, has another issue to deal with: higher shipping costs.

The maker of Cheerios cereal and Häagen-Dazs ice cream lowered its full-year profit forecast, citing higher freight and commodity expenses.

Operational costs have also risen as the company grapples with an industrywide grocery price war. The results drove the shares down as much as 6.9% in early trading.

Like its US packaged-food competitors, General Mills has suffered through a slowdown stemming from broad changes in how consumers eat and shop. Cereal, soup and yogurt sales have been declining as consumers seek more natural products.

While General Mills now seems to have turned a corner on sales under Chief Executive Officer Jeff Harmening, who took over last year, higher costs are cutting into the company’s results.

“We are moving urgently to address this increasingly dynamic cost inflation environment,” Harmening said in a statement Wednesday.

Outlook

The shares fell to as low as $45.90 in premarket trading. The stock had already slid 16% this year through the close on Tuesday.

The company cut its full-year outlook for earnings per share, excluding some items, to flat to up 1%. It had previously forecast a gain of at least 3%, based on currency staying constant.

General Mills said it changed the guidance because of higher shipping costs, which have been an issue across the industry and in the broader US economy this year as e-commerce and a trucker shortage have driven up prices.

The company blamed those costs and others for the 2.2 percentage-point drop in its gross margin to 32.3% in the third quarter, which ended February 25.

News by Bloomberg, edited by ESM. Click subscribe to sign up to ESM: The European Supermarket Magazine. 

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