- General Mills posted a 4% net sales decline to $3.77 billion for its first fiscal quarter of 2018 in its latest earnings report. Organic net sales were also down 4% because of volume declines in North American retail, Asia and Latin America.
- Net earnings totaled $405 million, down 1% from a year ago. Operating profit was down 3% from last year to $626 million due to lower sales, which the company noted were partially offset by lower restructuring costs. Diluted earnings per share were up 3% to $0.69.
- CEO Jeff Harmening said in the report that net sales were in line with expectations, and the company reiterated its full fiscal 2018 outlook. "We're encouraged by the improvement we saw in first-quarter retail sales trends, and we're confident that improved momentum will translate into stronger organic net sales results in the rest of the year, beginning in the second quarter," he said. "Importantly, we remain on track to deliver our fiscal 2018 goals in a challenging and dynamic environment."
The Minneapolis-based company has seen a steady sales drop in RTE cereal and yogurt, while snack bars and natural and organic brands have been on a comparative upswing. Cereal sells better in other countries than in the U.S., although the recent hurricanes may have helped General Mills in that area.
This earnings report continues the slide from earlier this year, when snacks were up and yogurt was down — despite company efforts to diversify products and flavors in that segment. In the report released on Wednesday, General Mills' U.S. cereal sales dropped 7% and snack sales were down 2%. Declines were partially offset by growth in Nature Valley products, which were marketed as healthier alternatives.
General Mills has been removing artificial colors from many of its cereals and has also invested in more natural products, most notably its purchase of Annie's Homegrown for $820 million in 2014. That direction has helped some, but it may not be enough to offset the continuing slide in light and Greek Yoplait yogurt brands. One bright spot was the new Oui by Yoplait French-style yogurt product, which General Mills debuted in June.
John Foraker, the founder and longtime head of Annie's Homegrown, recently departed General Mills to join an organic baby food startup in the Bay Area. Foraker took pains to deny that leaving General Mills had anything to do with the company's "recent struggles as it works to position itself for another 150 years," and said the entrepreneurial opportunity was right.
As a longtime brand in the RTE cereal market, General Mills has had to reach beyond its traditional segments to attract new customers and make itself relevant in today's market. And while it's been somewhat successful in new product development, that clearly hasn't been enough to stem the exodus of customers looking for new and different breakfast items.
Only time will tell whether the iconic brand will be able to make the financial and creative investment needed to turn things around and post more positive results. It is likely to be a slow process, since the company reaffirmed its forecast of a 1% to 2% drop in net sales for the remainder of the fiscal year.