Financial Performance

Cereals Power General Mills’ 2% Sales Gain

The company's topline growth in Q2 was across geographies, product platforms, and channels, with cereal sales up 7% in the U.S.
Matthew HellerDecember 20, 2017

General Mills posted its first increase in quarterly sales since early 2015, with across-the-board growth led by cereals including its new Chocolate Peanut Butter Cheerios product.

The 2% jump in revenue to $4.20 billion for the second quarter reflected a 7% increase for the U.S. cereal operating unit and a 5% increase for U.S. snacks. Revenue from the North America retail segment, General Mills’ largest business division, rose 1% to $2.77 billion.

Gross margin declined 260 basis points to 34.4% of net sales but adjusted earnings of 82 cents per share were in line with analysts’ estimates.

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“I’m pleased with the breadth of the topline improvement we delivered this quarter across our geographies, product platforms, and channels,” General Mills CEO Jeff Harmening said in a news release. “We’re executing better, with stronger innovation, more effective brand building, and better merchandising leading to market share gains in the majority of our key global platforms.”

The cereal surge was powered in part by a strong sell-in for Chocolate Peanut Butter Cheerios while cereals including Lucky Charms led performance in Nielsen-measured outlets.

On the snacks side, growth in sales of Lärabar and Nature Valley snack bars and fruit snacks offset declines in Fiber One snack bars. Yogurt sales fell 11% in North America but that was an improvement on the 17% drop a year ago, with the French-style Oui product accounting for nearly 10% of sales.

Another new product, Pillsbury Stuffed Waffles, also made a strong debut.

“People are eating healthier and want organic and non-GMO and they want pure ingredients,” Harmening told the Minneapolis Star-Tribune. “Well, Stuffed Waffles is probably none of those things, but they taste really good and they’ve got a job to do, which is fill you up in the morning.”

General Mills now expects 2018 organic sales growth to be between flat and down 1%, up from the prior forecast of a decline of 1% to 2%. “We’ve got work to do but we’re pleased with what we see in this quarter and we’re looking to continue the momentum,” Harmening said.