Managing the “volatile environment” at General Mills
Minneapolis, MinnesotaAccording to chairman and CEO Jeffrey L. Harmening, General Mills, Inc.’s first-quarter financial results were in line with expectations, despite uncertainty surrounding the economic climate and customer behavior. The firm has thus maintained its projection for modest increase in revenues and profitability in the upcoming fiscal year, 2024.
“Our first-quarter results at the enterprise level were broadly in line with our targets, despite a continued volatile environment and with various puts and takes across our business,” Mr. Harmening stated upon releasing the quarterly results. Looking ahead to the remainder of fiscal 2024, we have robust growth objectives bolstered by robust investment levels, elevated productivity levels in HMM (holistic margin management), and effective capital deployment. With assurance in our intentions and flexibility
According to the company’s projection, adjusted earnings per share would increase by 4% to 6% and net sales will increase by 3% to 4% in the fiscal year 2024.
The net income for the first quarter ended August 28 was $673.5 million, or $1.15 per share on the common stock. This is a 16% decrease from the first quarter of previous year, when it was $820 million, or $1.37 per share. Sales grew by 4% to $4.9 billion from $4.7 billion in the previous year.
One of the fiscal 2023 results was a gain of $430.9 million on a divestment. After accounting for these and other exceptional costs, first-quarter earnings per share decreased by 1% compared to the prior year.
While price and mix increased sales by six percentage points, volume decreased by 2%, contributing to a 6% increase in quarterly sales.
Mr. Harmening provided investors with an update on supply chain disruptions and stated that customer service standards had reached the “mid-90s in North America.”
Supply interruptions have decreased to levels experienced before the outbreak, he claimed. “We are able to allocate more resources to our productivity initiatives thanks to this improvement, and we are still on track to produce cost savings for HMM.”
The North America Retail (NAR) segment’s operating profit increased by 3% to $798.2 million in the first quarter of this year from $777.8 million in June to August of previous year. Sales increased by 3% to $3.1 billion from $3 billion in the previous year.
“We saw elevated retail sales growth for at-home food in our North America Retail segment in the first quarter compared to the pre-pandemic period, though the pace moderated from the double-digit growth rates we saw in fiscal 2023,” Mr. Harmening stated. “This is because some consumers are shifting toward value and inflation-driven pricing has less of an impact.”
“As we expected,” Mr. Harmening stated, citing supplier relationship management initiatives and a favorable supply chain position in comparison to competitors a year earlier, the retail division lost market share in the quarter. As the year goes on, these effects will progressively diminish, “allowing us to get back to stronger share performance,” he stated. Furthermore, in the first quarter, General Mills had better growth in non-measured channels, such as club, discount, and
Significantly, according to Mr. Harmening, General Mills’ core indicators showed a positive trend in the first quarter.
During a call with investors on September 20, Mr. Harmening stated, “For example, we grew share of distribution on more than 70% of our NAR business in Q1 including cereal, snack bars, refrigerated dough, yogurt, and desserts.” “We increased the efficiency of our merchandising, as evidenced by a mid-single-digit increase in display support over the previous year.” Furthermore, we may redirect our attention to General Mills’ demonstrated competencies of brand development and outstanding innovation delivery as supply chains get better.
We maintained our investment in our brands in Q1, with double-digit increases in media spending. We have also received positive feedback on the introduction of our new products, which include expanding our mini-cereals platform to include two of the leading brands in the category: Lucky Charms and Cocoa Puffs, and adding luxury to the yogurt section with the introduction of Haagen-Dazs cultured cream.
In the future, According to Mr. Harmening, the cautious nature of consumers gives him hope for the NAR segment’s future volume developments.
“Eating out is approximately four times more expensive than cooking at home,” he stated. We thus anticipate that at-home eating will likely increase slightly as consumers get more busy and settle into their warmer routines in the fall. We’ll investigate.
Operating profit for North America Foodservice was $59.1 million, a 10% increase from $53.6 million in the first quarter of fiscal 2023. Over the previous year, net sales increased by 8% to $536 million from $496.4 million.
The acquisition of TNT Crust by the corporation accounted for four percentage points of the increase in revenue.
According to General Mills, “organic net sales were up 4% despite a six-point headwind from market index pricing on bakery flour.” “Favorable net price realization and mix drove the segment’s 10% increase in operating profit to $59 million, which was partially offset by higher input costs.”
You may also like:
Food security in emerging nations: issues and remedies
Are drinks the secret to increasing cannabis use among consumers?
Managing the lack of labour for mushroom picking
Mr. Harmening said, “We observed a rise in customer traffic in Q1 in the hotel, travel, education, and other non-restaurant take-out food channels, while restaurant traffic remained mostly consistent with levels observed a year earlier. In Q1, the North American Foodservice segment’s operating profit increased by 10%, mostly due to favorable price and mix, with higher input costs acting as a counterbalance.
Mr. Harmening attempted to elucidate the possible meaning of “improving volume trends” by providing context for the advice he gave in his remarks.
He stated, “We do expect our volumes to improve.” Crucially, they don’t need to become too optimistic. All they need to do is get better than they are today. And a big part of it will be expanding market share as prices rise, competitors’ comparisons get more difficult, and our product becomes easier to use due to supply chain channels.