‘The change in consumer behaviour are the likes of which we have never seen’: Coronavirus-demand toys with General Mills’ bottom line

By Gill Hyslop contact

- Last updated on GMT

The global coronavirus outbreak is impacting General Mills' profits. Pic: GettyImages/3D_generator
The global coronavirus outbreak is impacting General Mills' profits. Pic: GettyImages/3D_generator

Related tags: General mills, earnings report, COVID-19

The Cheerios and Nature’s Valley maker has raised its forecast for 2020, as social distancing efforts aimed at slowing the rapid spread of COVID-19 is causing consumers to stockpile, boosting demand for eat-at-home products like cereals and boredom-busting treats like snack bars.

The US food giant now expects constant-currency adjusted profit per share in 2020 to rise 6% to 8%, compared with an earlier projection of an increase of 3% to 5%.

However, the breakfast cereal and snack producer posted a slight decline for its bottom line YOY in third-quarter fiscal 2020.

Revenue remained essentially flat at $4.18bn for the quarter, versus year-ago revenue of $4.20bn.

This was somewhat affected by the impact of coronavirus on Häagen-Dazs sales in Asia – General Mills operates 470 Häagen-Dazs ice cream shops there that were hit hard – as well as a softness in the North American Retail and Convenience Store & Foodservice segments, particularly the US Meals & Baking, US Cereal, US Snacks and US yoghurt categories.

Increased demand for food at home

On the upside though, the company is seeing elevated demand amid the COVID-19 outbreak and has issued an optimistic outlook that predicts continued sales and profit gains as consumers shift their budget spending toward eat-at-home products that have a long shelf-life like cereals, snack bars, baking flour and soup.

“Our third-quarter results were broadly in line with our expectations, except for the negative impact in Asia of the COVID-19 virus outbreak,”​ said CEO Jeff Harmening, adding, “I’m proud of the way we’ve partnered with our retail customers in recent weeks to service consumers’ increased demand for food at home during this unique time.”

The Golden Valley-based company believes it is in a good position to meet the manufacturing and distribution challenges caused by the outbreak, certainly over the short term. It said its plants are running at full capacity to cope with the stockpiling demand. It has also opened a ‘control tower’ that’s operational 24/7 to gauge the ebb and flow of demand levels across all its global businesses.

“We'll remain agile to adapt to changing demand patterns around the world as circumstances with COVID-19 continue to develop.

“Maybe you’ve seen photos of empty store shelves. But food continues to flow. We continue to make it. Stores continue to stock. The change in consumer behaviour are the likes of which we have never seen,” ​added Harmening.

Q3 highlights

  • General Mills earned $454m in the quarter ended February 23, 2020, a 2% increase over a year ago.
  • Adjusted earnings per share of 77 cents – while declining 7.3% from 83 cents per share a year ago – beat analysts’ estimate of 75 cents per share.
  • Sales fell 1% to $4.18bn.
  • Adjusted operating profit came in at $675m.
  • General Mills stock fell 3% on Wednesday, a day when the broader market dropped 5%.
  • The company sees adjusted earnings rising by between 6% and 8% in fiscal 2020.

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