Yahoo Finance General Mills’ US Retail Segment Contributes to 1Q16 Operating Profit
General Mills 1Q16 Results: Net Sales are Down and Earnings Up
US Retail Segment
The 1Q16 net sales for General Mills’ (GIS) US Retail segment totaled $2.53 billion, up by 4% from the prior year. The company’s pound volume contributed 1 percentage point to net sales growth. In addition, its net price realization and mix added 3 percentage points of growth, while Annie’s Homegrown contributed 3 percentage points to net sales growth.
The company’s Cereal, Meals, Yogurt, and Snacks operating units also posted net sales gains for 1Q16. The company’s Baking Products unit sales were comparable to last year’s.
Perhaps most significantly, the company’s US Retail segment’s operating profits totaled $630 million, up by 38%. The year-ago period reported a 25% profit decline, but the year-ago period saw high promotional expenses, a decrease in SG&A expenses, and lower supply chain costs, which ultimately drove this 1Q16 increase in segment profit.
Convenience Stores and Foodservice
The 1Q16 net sales from General Mills’ Convenience Stores and Foodservice segment rose by 1% to $478 million, reflecting an increased pound volume. Snacks, frozen meals, mixes, and cereal led the company’s sales performance in the quarter. The segment’s operating profit declined by 9% to $80 million, driven by higher input costs, compared to the 18% profit growth in the year-ago period.
International segment
The first-quarter net sales for General Mills’ consolidated international businesses increased by 5% in constant currency. On a reported basis, net sales declined by 11% to $1.2 billion. This decline was due to a foreign currency exchange reduced net sales growth of 16%.
Pound volume added 4 percentage points of net sales growth while net price realization and mix added 1 point of growth. The Constant-Currency segment’s net sales rose by 7% in Europe, 5% in Canada, 3% in the Asia-Pacific region, and 3% in Latin America.
The company’s International segment’s operating profit declined by 20% to $117 million, 17% of which was due to unfavorable foreign currency exchange. The Constant-Currency segment’s operating profits decreased by 3%, compared to the year-ago period, when profit increased by 17% in constant currency.
General Mills’ main competitors are J.M.Smucker (SJM), Bungee (BG), and Flowers Food (FLO), which reported operating margins of 13.68%, 1.61%, and 9.01%, respectively, in their most recent corresponding quarters. The Consumer Staples Select Sector SPDR Fund (XLP) invests 1.88% of its total portfolio in General Mills.
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