Announcing its financial results for the quarter ending August 28, General Mills reported a 4% year on year decline in overall organic sales. Taking in factors including the divestiture of the North American Green Giant business and impact of foreign exchange, sales fell 7% to $3.9bn.
"Our net sales performance did not meet our expectations due to the challenging macro environment, a difficult year-over-year comparison, and a slower start to the year on certain businesses,” said General Mills chairman and chief executive officer Ken Powell.
US Retail segment
In the firm’s US Retail segment, sales tumbled 8% year on year to $2.33bn, with organic net sales down 5%.
Strong results had been posted by Annie's and Lärabar Nature Valley cereals and Old El Paso Mexican products but this had been more than offset by declines in Yoplait yogurt and Progresso soup.
US Retail segment operating profit fell 6% year on year, versus a 38% year on year increase reported 12 months ago.
Powell said the company was taking actions to improve its overall net sales performance going forward.
General Mills first-quarter 2017 results
Net sales: -7% to $3.9bn
Organic net sales: -4%
Operating profit: -6% to $646m
Diluted EPS: $0.67
“At the same time, we have a number of encouraging examples across our global portfolio where our efforts to adapt to evolving consumer interests are driving positive results,” he added.
Among the strong performers in the company’s International segment were Yoki snacks in Brazil, Old El Paso Mexican products in Canada, and Yoplait yogurt and Wanchai Ferry frozen meals in China.
On a constant-currency basis, net sales rose in the Latin America and Asia Pacific regions but this was offset by declines in Europe and Canada.
Overall International segment organic net sales fell 1% year on year. Net sales were down 6% to $1.13bn when taking into account foreign exchange and divestiture of Green Giant in Canada. International segment operating profit fell 14% as reported and 11% in constant currency.
Convenience Stores and Foodservice Segment
Market index pricing on bakery flour drove a 7% decline in sales from the Convenience Stores and Foodservice segment to $446m, reported General Mills, although this was partially offset by increases in yogurt, biscuits, and cereals. Organic net sales also fell 7%, but lower input costs drove a 16% increase in segment operating profit.
Powell said he expected the company’s organic net sales to improve over the rest of the year as its ‘Consumer First’ initiatives gained traction.
He added that margin management and other cost savings initiatives would help the business achieve its previously announced profit goals for fiscal 2017.
General Mills reiterated its key fiscal 2017 targets including: Organic net sales growth from flat to -2%, and constant-currency total operating profit increasing 6 to 8%.