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Shares of General Mills Inc. (NYSE: GIS ) rose nearly 3% on Thursday after the company reported better-than-expected results for the third quarter of 2023 and raised its full-year guidance again. Here are the key takeaways from the earnings report:
Results beat estimates
Net sales increased 13% year-over-year to $5.1 billion in the third quarter of 2023. Organic net sales increased 16%, driven by price and mix increases. GAAP earnings fell 16% to $553 million, or $0.92 per share in the quarter. Adjusted EPS increased 17% to $0.97, driven primarily by higher adjusted operating profit.
Strong segment performance
General Mills saw broad growth in the segment during the third quarter. On an organic basis, net sales increased in all segments, with three out of four witnessing double-digit growth.
Net sales in the North America Retail segment increased 15% on a reported basis and 18% on an organic basis, driven by price increases and mix. The growth was supported by double-digit increases in US Food & Baking Solutions and US Snacks as well as a 7% increase in US Breakfast.
Pet segment sales were up 14% on a reported and organic basis. North American Foodservice sales increased 25% on a reported basis and 19% on an organic basis. Sales growth was driven by price increases and mix. The International segment decreased sales by 3% in Q3 due to lower pound volume but organic sales increased by 8% with growth in Europe & Australia, distributor markets, Brazil and China.
Innovation continues to be an important part of General Mills’ strategy and this has helped retail sales of new products remain 30% higher than the category average over the past three years. The company continues on this path with new mini versions of Cinnamon Toast Crunch and Reese’s Puffs in the cereal category and a new line of Haagen-Dazs Macaron ice cream in International. In the Pet segment, the company is testing new products in the dry dog food, fresh dog food and treat categories.
Insights raised
General Mills expects its performance in fiscal year 2023 to be affected by the health of the consumer economy, inflation and the frequency and severity of supply chain disruptions. The company expects input cost inflation for the year to be 14-15% of total cost of goods sold. It also expects supply chain disruptions to be lower than the previous year.
Based on business momentum, General Mills again raised its guidance for fiscal year 2023. The company now expects organic sales to grow 10-11% compared to its previous range of around 10%. Adjusted EPS will now increase by 8-9% in constant currency compared to the previous range of 7-8%.
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