General Mills Q2 Profit Declines, Misses Estimates

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Branded food company General Mills, Inc. (GIS) reported Tuesday a profit for the second quarter that declined 8 percent from last year, hurt by lower gross margins amid significant input cost inflation and elevated costs related to supply chain disruptions.

Adjusted earnings per share missed analysts' estimates, but quarterly net sales topped it. The company also improved its adjusted earnings and organic net sales growth guidance for the full-year 2022.

For the second quarter, net earnings attributable to General Mills declined 13 percent to $597.2 million or $0.97 per share from $688.4 million or $1.11 per share in the prior-year quarter.

Excluding items, adjusted earnings for the quarter were $0.99 per share, compared to $1.06 per share in the year-ago quarter.

On average, 17 analysts polled by Thomson Reuters expected the company to report earnings of $1.05 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter increased 6 percent to $5.02 billion and organic net sales were up 5 percent. Analysts expected revenues of $4.84 billion for the quarter.

Net sales for the North America Retail segment were up 2 percent to $2.98 billion, net sales for the Pet segment grew 29 percent to $593 million and net sales for the Convenience Stores & Foodservice segment increased 23 percent to $541 million from last year.

Net sales for the Europe & Australia segment edged down 1 percent to $464 million, while net sales for the Asia & Latin America segment increased 5 percent to $450 million from last year.

Gross margin was down 270 basis points to 33.8 percent of net sales, driven by higher input costs and unfavorable mark-to-market effects, partially offset by favorable net price realization and mix.

Looking ahead to fiscal 2022, General Mills updated its guidance to reflect stronger topline growth and significantly higher input costs than originally expected, as well as the impact of the European Yoplait divestiture

The company now projects constant-currency adjusted earnings per share to range between down 2 percent and up 1 percent from the base of $3.79 per share reported in fiscal 2021. Previously, it was expected to be flat to down 2 percent.

Organic net sales are expected to grow 4 to 5 percent, reflecting stronger-than-expected performance in the first and second quarters and incremental Strategic Revenue Management actions that will take effect in the second half. Previously, it was expected to be down 1 to 3 percent

The Street is currently looking for earnings of $3.78 per share on revenues of $18.27 billion for the full-year 2022.

Further, the company said it expects changes in consumer behaviors driven by the COVID-19 pandemic will result in ongoing elevated consumer demand for food at home, relative to pre-pandemic levels. These changes include more time spent working from home and increased consumer appreciation for cooking and baking.

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