USA- General Mills, the renowned US food group, has revised its fiscal 2024 sales forecast downward, citing weaker-than-expected demand and a slower recovery in consumer spending.
The company released its second-quarter financial results on December 20, revealing a 2% year-on-year decrease in net sales to US$5.13 billion.
The owners of popular brands like Haagen-Dazs and Cheerios had previously anticipated growth of 3% to 4% for fiscal 2024.
However, in light of the ongoing slowdown, General Mills now forecasts organic net sales between down 1% and flat, compared to the previous year. Analysts, on the other hand, had expected growth of 2.4%.
General Mills CEO Jeff Harmening addressed the situation, acknowledging the challenges posed by a slower volume recovery in the face of a persistently challenging consumer landscape.
“We’re adapting our plans to the evolving consumer environment and staying focused on driving long-term growth, with a priority on winning through innovation, brand building, and in-store execution,” he stated.
Despite the dip in sales, Harmening emphasized the company’s confidence in its ability to generate bottom-line growth, primarily attributed to strong cost savings through Holistic Margin Management (HMM).
In the three months leading up to November 26, General Mills reported a 2% year-on-year increase in second-quarter operating profit to US$811.8 million.
While net earnings fell by 2% to US$595.5 million, higher pricing and robust cost-saving measures contributed to a 170 basis points rise in gross margin. Harmening noted the commitment to the Accelerate strategy, aimed at achieving sustainable, profitable growth and delivering top-tier shareholder returns in the long term.
Looking ahead, General Mills anticipates fiscal 2024 adjusted operating profit and adjusted diluted EPS to increase by 4% to 5% in constant currency, a slight adjustment from the previous range of 4% to 6% growth. The company attributes this adjustment to persistent high input costs, primarily related to labor.
Addressing concerns in the market, analyst John Baumgartner from Mizuho Securities highlighted potential challenges in the industry’s ability to remain disciplined on pricing and promotions.
Despite the reaffirmation of cost-saving measures, he noted that efficiencies might not fully offset revenue concerns in the coming months. General Mills remains committed to reshaping its portfolio through strategic acquisitions and divestitures to enhance its growth profile.
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