NEW YORK (AP)— General Mills’ second-quarter net income slipped 28 percent in the second quarter, the company said Tuesday, citing rising costs. Revenue jumped by double digits as it was able to successfully raise prices.
The food company maintained its adjusted full-year earnings guidance, but cautioned that second-half gross margin as a percent of sales will be below year-ago levels.
General Mills, which sells Cheerios, Yoplait yogurt and other foods, has struggled as other food producers have with higher costs for nearly everything, from ingredient to packaging. Most companies have hiked prices to offset these pressures. Higher prices and strong demand boosted revenue at General Mills, but its own rising costs have tugged at profits, which fell shy of most expectations.
The Minneapolis company earned $444.8 million, or 67 cents per share, for the quarter ended Nov. 27. That’s down from $613.9 million, or 92 cents per share, a year earlier.
Excluding charges tied to its Yoplait deal and other items, earnings were 76 cents per share.
Analysts polled by FactSet were looking for earnings of 79 cents per share.
The company’s stock fell 14 cents to $39.45 in premarket trading.
General Mills announced in July that it was acquiring a controlling stake in Yoplait. It was the first full quarter with the yogurt brand under its ownership, boosting total international sales by more than 50 percent.
Quarterly revenue rose 14 percent to $4.62 billion from $4.07 billion, helped by higher prices. Wall Street expected revenue of $4.6 billion.
Revenue for the U.S. retail segment climbed 3 percent thanks to increased prices and strong snack sales.
Snack sales rose 20 percent, driven by Fiber One and Nature Valley snack bars, while sales for the Pillsbury division increased 9 percent on strong demand for Totino’s frozen snacks and pizza, Pillsbury refrigerated baked goods, and new Pillsbury frozen breakfast items.
Sales in the segment, which includes cereals, edged up 1 percent on solid performances from Honey Nut Chex, Cinnamon Toast Crunch and well as contributions from new products such as Cinnamon Burst Cheerios and Fiber One 80 Calorie cereal.
In the international segment, revenue surged 55 percent to $1.16 billion, driven by Yoplait. Sales were strong in Europe, while Canada, Latin America and the Asia/Pacific region also posted sales gains.
Bakery and foodservice revenue rose 12 percent to $522 million in the quarter.
For the full year, General Mills still expects adjusted earnings of $2.59 to $2.61 per share. Analysts predict earnings of $2.61 per share.
The company said its second-half adjusted earnings per share will likely see a high single-digit to low double-digit percentage increase, with sales for the period rising by double-digits. Gross margin as a percentage of sales is anticipated to drop below the prior-year level due to increased costs and the business adjustments needed to include the Yoplait transaction. Operating profit in the second half is expected to rise above year-ago levels, with a planned increase in advertising and media spending.
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