MINNEAPOLIS — Second-quarter earnings at General Mills, Inc. slid 9%, dragged down by what the company’s top executive described as “disappointing net sales performance” during the period. Net income in the second quarter ended Nov. 27 was $481.8 million, equal to 82c per share on the common stock, down from $529.5 million, or 88c per share, in the same period a year ago.
The Minneapolis-based company sustained a 7% decline in net sales, falling to $4,112.1 million from $4,424.9 million a year ago. Sales were bogged down by lower organic net sales and the company’s divestiture of the North American Green Giant business.
Following the release of earnings, the company’s share price fell more than 4% from its close of $63.06 on Dec. 19 in early morning trading on the New York Stock Exchange.
|Ken Powell, chairman and c.e.o. of General Mills|
“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 U.S.,” said Ken Powell, chairman and chief executive officer. “We’re making targeted adjustments to our plans in the second half to improve our top-line performance while still delivering our margin expansion and e.p.s. 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.”
Operating profit in the U.S. Retail segment increased 2.5% to $615.4 million from $600.4 million a year ago. General Mills attributed the gain to benefits from cost savings initiatives and a decrease in media and advertising expense. Net sales fell nearly 9% to $2,521.3 million from $2,761.9 million.
“Increases in Annie’s and Lärabar natural and organic products, Old El Paso Mexican products, and Totino’s frozen hot snacks were offset by declines in Yoplait yogurt, Pillsbury refrigerated dough and Progresso soup,” General Mills said.
In the International segment, operating profit fell 22% to $105.9 million from $136.2 million, while sales decreased 5% to $1,103.3 million from $1,157.2 million.
“Strong performance on 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 were offset by declines in Yoplait yogurt in Europe and the impact of snacks restructuring in China,” the company said.
Operating profit in the Convenience Stores and Foodservice segment increased 6% to $109.1 million from $102.8 million, reflecting benefit from cost savings initiatives, lower input costs and higher grain merchandising earnings. Sales in the segment fell nearly 4% to $487.5 million from $505.8 million, with increases for the yogurt, mixes and cereal platforms offset by market index pricing on bakery flour.
For the six months ended Nov. 27, net income was $890.8 million, or $1.50 per share, down 7% from $956.1 million, or $1.59 per share, in the same period a year ago. Net sales for the six months fell 7% to $8,020 million from $8,632.8 million.