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General Mills Price Hike Pays Off

General Mills Price Hike Pays Off

Thursday, March 21st, 2019

It’s time to stand up and salute to General Mills for its stellar third quarter. The company’s third quarter results exceeded forecasts, putting it a step ahead of its competitors, as reported by CNN Business. In a market that is increasingly turning toward organics and fresh food options, General Mills was able to remain on top by increasing its prices—proving that consumers don’t mind paying more for the company’s popular brands.

Jeff Harmening, Chairman and Chief Executive Officer, General Mills“We had a strong third quarter, with positive organic sales growth and significant operating margin expansion,” said General Mills Chairman and Chief Executive Officer Jeff Harmening, in the company’s most recent financial report. “Our year-to-date performance and fourth quarter plans give us confidence that we will meet or exceed all of our key fiscal 2019 targets. For the full year, we now expect adjusted diluted EPS and free cash flow conversion will exceed our initial targets, net sales will finish toward the lower end of our guidance range, and adjusted operating profit will finish toward the higher end of the range. Our improved execution and strengthened performance this year reinforce our view that a balanced approach to top and bottom-line growth, centered on our Consumer First strategy, will drive long-term value for our shareholders.”

Some of the financial report’s highlights include:

  • Net sales increased 8 percent to $4.2 billion, and were up 10 percent in constant currency; organic net sales grew 1 percent
  • Operating profit increased 14 percent; adjusted operating profit increased 25 percent in constant currency
  • Diluted earnings per share (EPS) of $0.74 declined 54 percent from the year-ago period that included benefits from U.S. tax reform; adjusted diluted EPS of $0.83 increased 6 percent in constant currency
  • Company raises full-year fiscal 2019 guidance for adjusted diluted EPS and free cash flow conversion; narrows guidance ranges for net sales and adjusted operating profit

While the company’s shares are still down about five percent since spring 2014, according to CNN Business, its stock is up about 26 percent this year.

General MIlls' third quarter results exceeded forecasts, putting the company a step ahead of its competitors

Competitors saw a sluggish market, however, as shares of Kellogg are down around four percent, and Kraft Heinz’s shares are down more than 25 percent. With major retailers like Target, Walmart, and Costco pressuring food companies to keep prices low, the company’s competitors ultimately suffered. And while the market has shifted from processed foods to fresh and organic foods, the General Mills’ competitors did not raise prices to compensate. General Mills did more than just raise prices, as the company is also focused on bringing new, trendy products to consumers, such as its organic brands Cascadian Farm, Annie’s, and Muir Glen, as well as Liberté yogurt.

While the sales volume of the company’s products fell in Europe and North America during the most recent quarter (though sales volume did rise in Asia), total sales rose about eight percent compared to a year ago, thanks to the price increase.

Will this strategy continue to pay off for General Mills? Deli Market News will keep you updated.

General Mills