The company’s shares were down by 8% after releasing fourth-quarter earnings…
Shares of General Mills tumbled after the company delivered its latest earnings report. The company’s revenue fell short of expectations during its fiscal fourth-quarter.
This was largely attributed to the sharp decline in demand for the company’s snack foods. In fact, the report revealed that the company’s pet division is the only real area where there’s much consumer demand.
General Mills owns well-known brands like Cheerios, Lucky Charms, and Fiber One bars. The company experienced a number of challenges during its fourth quarter. Here’s the lowdown…
A Closer Look at the Earnings Report
In some ways, General Mills’ earnings report doesn’t seem to be too bad. The company reported earnings of 83 cents per share, which is better than the estimated 77 cents per share.
The company’s sales grew 7% year-over-year but still fell short of investor estimates. And a closer look at the numbers shows that nearly all of the growth came from the company’s pet division.
Sales of the company’s snack foods, like Nature Valley granola bars and Chex Mix, declined sharply. Meanwhile, sales of the company’s cereal and yogurt products remained largely unchanged from a year earlier.
The real growth occurred with the company’s pet line, Blue Buffalo. General Mills purchased Blue Buffalo last year for $8 billion and so far, this investment seems to be paying off. Blue Buffalo’s sales were up 38% from a year earlier.
What are the Company’s Next Steps?
In all fairness, company executives seem to recognize that they need to make some changes going forward. CEO Jeffrey Harmening acknowledged that many of the company’s foods have fallen “out of step” with current consumer eating trends.
Most people are looking for healthier foods and avoiding preservatives so sugary cereal like Lucky Charms don’t exactly fit the bill. The company plans to address this by increasing its spending on new products, particularly meal bars and snacks.
General Mills made a smart move by investing in Blue Buffalo so it is feasible it could turn around its snack food division. If the company can find a way to re-engage consumers with its other product lines, the company could turn its sales around in the coming years.
