MINNEAPOLIS — Innovation lifted U.S. Cereal’s performance, and sales growth accelerated in the recently acquired Blue Buffalo Pet Products, Inc., carrying General Mills, Inc. to a sales increase of 8% in the third quarter ended Feb. 24. While performance of the company’s U.S. Snacks unit could improve, General Mills plans to introduce new products under the Nature Valley and Fiber One brands.
Net earnings attributable to General Mills in the third quarter totaled $446.8 million, equal to 74c per share on the common stock, which was down 53% from $941.4 million, or $1.64 per share, in the previous year’s third quarter. The decrease primarily reflected benefits from the Tax Cuts and Jobs Act in the previous year’s third quarter. Adjusted earnings per share were up 67%.
Third-quarter net sales of $4,198.3 million were up from $3,882.3 million in the previous year’s third quarter. Blue Buffalo Pet Products, which was acquired on April 24, 2018, drove the growth. Organic net sales increased 1%.
Minneapolis-based General Mills released its third-quarter results on March 20, when its stock price on the New York Stock Exchange closed at $48.29 per share, up 2% from a March 19 close of $47.24 per share.
In North America Retail, net sales of $2,518.6 million in the third quarter were up slightly from $2,517.4 million. Operating profit rose 12% to $581.6 million from $518.3 million, driven by benefits from cost-savings initiatives, lower selling, general and administrative expenses, and positive net price realization and mix, partially offset by input cost inflation.
Within North America Retail, U.S. Cereal recorded net sales growth of 4%.
“We’re encouraged by the improvement we're seeing in U.S. Cereal, where category trends have improved consistently since 2017,” said Jeffrey L. Harmening, chairman and chief executive officer of General Mills, in a March 20 earnings call. “We’re also pleased with our U.S. Cereal retail performance in the third quarter, with measured channels retail sales up 1% as we reached toward a more normal merchandising level.”
General Mills has gained market share in cereal through the first nine months of the fiscal year, he said.
“These results have been fueled by strong innovation, holistic brand building activations and benefits from price/mix,” he said. “Five of the top six new products in the category are Big G cereals, including Cheerios Oat Crunch, Cinnamon Toast Crunch, Cheerios and Fruity Lucky Charms.”
U.S. Meals and Baking had sales growth of 2% led by growth in Totino’s hot snacks, Old El Paso’s shells and tortillas, and Annie’s Mac and Cheese.
U.S. Snack sales slipped 1%, and U.S. Yogurt sales were down 2%. Canada sales fell 11%.
“Retail sales for our U.S. snack bar business were down mid-single digits year to date, and we continue to work to improve our trends in this important platform,” Mr. Harmening said. “On Nature Valley, we’re focused on improving the fundamentals and are looking forward to the launch of a new crispy creamy wafer bar that will start shipping in the fourth quarter.”
General Mills also plans to roll out a Fiber One new product in the first quarter of fiscal year 2020, said Jonathon J. Nudi, group president of North America Retail.
“Looking ahead to the next fiscal year, we have plans to renovate the Fiber One product line to increase its relevance with weight management consumers,” Mr. Harmening said.
Pet segment sales were $346.8 million in the third quarter. On a pro forma basis, net sales increased 4%. Pet segment sales escalated as they were $28.3 million for the four weeks ended Jan. 26, which compared with $26 million for the four weeks ended Nov. 3, 2018, $21.7 million for the four weeks ended Aug. 11, 2018, and $18.8 million for the four weeks ended May 19, 2018.
Pet segment operating profit was $73 million, which was $2 million below the prior year’s third quarter on a pro forma basis. General Mills expects pro forma Pet segment net sales growth will accelerate in the fourth quarter as the company expands distribution.
Third-quarter net sales for Convenience Stores & Foodservice increased 2.7% to $472.5 million. The Focus 6 platforms, including frozen meals, snacks, frozen baked foods and yogurt, drove the growth. Segment operating profit increased 15% to $96.7 million.
General Mills companywide in the first nine months of the fiscal year posted net earnings of $1,182.5 million, or $1.97 per share, which was down 33% from $1,776.6 million, or $3.10 per share, in the same period of the previous year. Nine-month net sales increased 7% to $12,703.5 million from $11,850.2 million.
General Mills should meet or exceed its key 2019 fiscal year financial targets, Mr. Harmening said. Constant-currency adjusted diluted e.p.s. growth should range between flat to up 1% in the fiscal year, which compared to a previous range of flat to down 3%.