General Mills' stock jumps after profit beat as price gains offset volume drop

By Tomi Kilgore

Stock climbs toward a fourth straight gain and a seven-month high

Shares of General Mills Inc. jumped Wednesday, after the consumer-foods company reported a fiscal third-quarter profit that rose above expectations, as price increases and cost savings helped offset volume declines.

The parent of food brands including Cheerios, Häagen-Dazs and Betty Crocker also affirmed its full-year outlook, given expectations of the continuing health of consumers, moderating inflation and increasing stability in the supply chain.

The stock (GIS) rallied as much as 8.5% moments after the opening bell to an intraday high of $74.45, the highest price seen since Aug. 4, 2023, before paring gains to be up 1% in morning trading.

Net income for the quarter to Feb. 25 rose to $670.1 million, or $1.17 a share, from $553.1 million, or 92 cents a share, in the same period a year ago. That beat the FactSet consensus for earnings per share of $1.05.

Sales slipped 0.5% to $5.10 billion, but were above the FactSet consensus of $4.97 billion, as volume declined about 2% while price and mix increased about 2%.

Among factors hurting sales volume, Chief Executive Jeff Harmening said on the post-earnings call with analysts, according to an AlphaSense transcript, that he's seeing an increase in "value-seeking behaviors from consumers, affecting both the channels they shop and the size of the basket."

He said there was also an impact from "climate volatility," as cold temperatures across the U.S. in January helped sales of at-home food in North America retail, while suppressing away-from-home sales.

Sales for the North America Retail business of $3.2 billion was about flat from a year ago, as an increase in net price realization was offset by lower pound volume.

U.S. morning foods sales rose in the low-single-digits-percentage range, while meals and baking and snacks sales were down in the low-single-digits range.

Pet sales fell 3% to $624 million, as declines in pet treats and dry pet food was partially offset by growth in wet pet food.

North America Foodservice sales rose 1% to $552 million, helped by price increases and a "modest" increase in traffic at restaurants. The growth comes despite a 4-percentage-point headwind from bakery-flour pricing.

Gross margin improved by 1 percentage point to 33.5%, as cost savings and favorable price realization were partially offset by higher cost inflation and other supply chain costs.

For the full fiscal year, the company affirmed its guidance ranges for adjusted EPS growth, excluding the impacts of currency translation, of 4% to 5% and for organic sales growth of between down 1% and flat.

The stock has gained 6.4% year to date, while the Consumer Staples Select Sector ETF (XLP) has tacked on 5.2% and the S&P 500 index SPX has gained 8.7%.

-Tomi Kilgore

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03-20-24 1118ET

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