Cheerios maker General Mills cuts sales view as price hikes hammer demand
(Reuters) -General Mills cut its annual sales forecast on Wednesday and missed second-quarter estimates, warning of a slower recovery in demand following repeated price hikes on its breakfast cereals, snack bars and pet food products.
Its shares were down about 4% in premarket trading as the Cheerios cereal maker also lowered the upper end of its annual adjusted profit growth forecast to between 4% and 5% due to still-high input costs, primarily of labor.
Elevated interest rates and sticky inflation are prompting consumers to opt for pantry staples from cheaper private-label alternatives to pricier national brands such as General Mills (NYSE:GIS) and Conagra Brands (NYSE:CAG).
A series of price hikes, undertaken to offset steep input costs, have also pushed consumers to shop smaller pack and basket sizes.
«For the full year, we've revised our top-line outlook to account for a slower volume recovery,» CEO Jeff Harmening said in a statement.
Overall volumes in its North America retail segment fell 5 percentage points, while net sales were down mid-single digits for U.S. snacks like Nature Valley and its breakfast cereals including Cheerios and Cinnamon Toast Crunch.
General Mills forecast fiscal 2024 organic net sales between down 1% and flat, from a year ago, compared with its earlier forecast for growth of 3% to 4%. Analysts expected growth of 2.4%, according to LSEG data.
Its quarterly net sales fell 2% to $5.14 billion, below estimates of $5.35 billion.
Still, the higher pricing helped gross margin rise 170 basis points, with the company's adjusted earnings per share of $1.25 surpassing market expectations of $1.16.
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