Yahoo Finance General Mills' (GIS) Sales are Struggling: Will it Improve?
We issued an updated research report on General Mills, Inc. GIS, a leading global manufacturer and marketer of branded consumer foods, on Mar 31, 2016.
On Mar 23, General Mills reported mixed third-quarter fiscal 2016 results, missing the Zacks Consensus Estimate for sales while beating the same for earnings.
In November, General Mills divested the Green Giant and Le Sueur brands of frozen and shelf-stable vegetables to food manufacturer, B&G Foods, Inc. BGS.
Sales and profits at General Mills’ U.S. Retail segment, contributing 60% to sales, have been soft due to the changing consumer food preferences. The company, like many other U.S. food producers, such as Kellogg Company K and Mondelez International, Inc. MDLZ, has been struggling due to the shift in consumers’ preference toward natural and organic food.
The weakness has continued into fiscal 2016, with sales declining 2% in the first nine months. Intense competition in yogurt and reduced display and merchandizing levels in cereals and snacks are hurting results in the segment. Though category trends are improving, General Mills’ retail sales performance could not keep pace with the improved category trends, especially cereals and snacks.
In Yoghurt, lower dairy prices this year intensified the competition and higher competitive merchandising levels which hurt General Mills’ sales in the first nine months. Yogurt sales declined 4% year-to-date.
Management is trying to turn around this business through increased investment in cereals to foster growth, accelerate the performance of better-for-you snacking — both yogurt and snacks businesses — and drive double-digit growth in the natural and organic portfolio. The company is also investing in consumer focused innovation and marketing as well as accelerating the natural and organic product portfolio to boost growth.
In the fourth quarter, the company will continue to expand the renovation and innovation efforts and step up investment in advertising that should improve organic sales trends, mainly in cereals and snacks. The yogurt headwinds will, however, persist in fiscal fourth quarter.
Moreover, the Zacks Rank #3 (Hold) company is undertaking several multi-year restructuring initiatives to improve operational efficiency to generate cost savings and support key growth strategies. These significant restructuring savings can lead to steady bottom-line performance in fiscal 2016.
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GENL MILLS (GIS): Free Stock Analysis Report
B&G FOODS CL-A (BGS): Free Stock Analysis Report
KELLOGG CO (K): Free Stock Analysis Report
MONDELEZ INTL (MDLZ): Free Stock Analysis Report
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