General Mills Says Q2 Results are “Disappointing” As Consumers Shun Yoplait

21 Dec 2016 --- General Mills has posted a “disappointing” set of second quarter financials, after consumers shunned its Yoplait yogurt, Progresso soup and Pillsbury refrigerated dough brands. Income was down nine percent to $482m in the quarter ending November 27 while sales were down 7.1 percent to $4.1bn in the period.

The packaged goods giant said it now expects sales to fall between three and four percent for the year, which is a steeper than the previous forecast of being flat and down two percent.

General Mills, like its rivals, is battling to meet changing habits of consumers wanting healthier options on retail shelves. A key product such as Yoplait is facing heightened competition from Greek yogurt rivals such as Chobani which entice customers with claimed health credentials. To fight back, General Mills has launched new Annie’s organic yogurt products.

“Although we posted disappointing net sales performance in the second quarter, we delivered good growth in adjusted diluted EPS, driven by significant expansion in our adjusted operating profit margin,” said General Mills chairman and CEO Ken Powell.

“Our organic sales declines reflect the actions we've taken to optimize our spending and prioritize profitable volume, as well as weakening food-industry trends in the US.”

“We're making targeted adjustments to our plans in the second half to improve our topline performance while still delivering our margin expansion and EPS growth commitments.  We remain confident that our strategy of investing behind Consumer First ideas – while driving strong margin expansion – will generate long-term sustainable growth, robust cash flow, and top-tier returns for our shareholders.” 

Across US Retail, its biggest division in terms of revenue, sales came in at $2.52bn, down nine percent on the year. Sales increases in Annie’s, Old El Paso Mexican products, and Totino's frozen hot snacks were offset by declines in Yoplait yogurt, Pillsbury refrigerated dough, and Progresso soup. 

But operating profit across the unit was up two percent, helped by cost cutting and a reduction in advertising spend.

Across its Convenience Stores and Foodservice division, sales were down four percent to $488m with increases in yogurt, mixes, and cereal platforms offset by higher flour costs. Operating profit was up six percent, also helped by cost savings.

Across its International division, sales were down five percent to $1.1bn, mainly down to the negative impact of foreign exchange movements and divesting its Green Giant business in Canada.

There was a strong performance from Häagen-Dazs ice cream in Europe, Wanchai Ferry frozen meals and Yoplait yogurt in China, and Old El Paso Mexican products and Nature Valley grain snacks in Canada. 

But Yoplait performed poorly in Europe and there were costs associated with restructuring its business in China. International operating profit was down 22 percent.

General Mills results fell below analysts’ expectations and shares in the company were down 2.55 percent to $61.41.