While General Mills (GIS:NYSE) has largely managed to keep sales afloat in 2023 with price increases, investors have grown increasingly concerned about a lack of volume growth.

These concerns have affected many of the company’s food producer peer group but General Mills’ shares have chalked up among the largest losses.

The company makes and markets breakfast cereals Cheerios and Lucky Charms in partnership with Nestle (NESN:SWX) alongside a range of snacks, meals, frozen desserts and baking products. Key brands include Nature Valley, Häagen-Dazs, Yoplait and Old El Paso. General Mills also has a growing footprint in pet food.

In late June it posted a mixed fourth quarter update. Earnings were
slightly ahead of expectations but gross margins eased as the business was hit by cost inflation which it could not fully pass on to customers.

More worryingly for investors, volumes fell substantially. Shoppers seem to be trading down to cheaper unbranded alternatives and the trend of people eating in during the pandemic has reversed as people are able to frequent restaurants again.

For the current financial year, the company is guiding for earnings per share rising 4% to 6% and organic net sales up 3% to 4% with cost inflation of 5%, mainly driven by wages.

General Mills’ management face a difficult challenge of trying to lift volumes while not sacrificing too much on price – the market will be closely watching how this conundrum is being handled when it reports first quarter numbers on 20 September.

US UPDATES OVER THE NEXT 7 DAYS

QUARTERLY RESULTS

September 18: Eaton Vance

September 19: AutoZone, Apogee, Steelcase

September 20: FedEx, General Mills, KB Home, H B Fuller

September 21: Darden Restaurants, FactSet Research, AAR, Scholastic, Valneva, Deep Yellow

‹ Previous2023-09-14Next ›