Consumers are still putting cereal and other packaged food items from General Mills in their grocery carts — but are holding off on buying stuff for their pets.
General Mills stock rose 3% during pre-market trading on Wednesday, inching toward a seven-month high, following the company’s third-quarter earnings report.
The Minneapolis, Minnesota-based General Mills beat Wall Street’s expectations. The company generated revenue during its third quarter of $5.1 billion, or $1.17 in earnings per share. Analysts had predicted it would generate $4.95 billion, or $1.04 in earnings per share.
The Cheerios and Yoplait maker reported net income of $670.1 million during the period, but issued a cautionary outlook for its 2024 fiscal year — in part due to lingering factors such as stubborn inflation and supply chain stability.
Although the company is a consumer staples stock, cash-strapped customers are looking for ways to save money and some are reaching for cheaper options even when it comes to necessities like food.
General Mills CEO Jeff Harmening said a reduction in Supplemental Nutrition Assistance Program (SNAP) benefits has contributed towards a slight decline in sales. The government sponsored programs intend to provide food benefits to low-income families.
They’re also holding off on making purchases for their pets. General Mills’ sales for its retail pet segment were down 3%, the company said, driven by lower demand.
General Mills Harmening said during the company’s second-quarter earnings call in December that consumers are still “getting used to new prices in the marketplace,” and that it will likely take a bit longer for “consumers to settle in” to new price points.
Harmening pointed to similar factors Wednesday and said General Mills is continuing to “navigate today’s evolving operating environment,” while still aiming to make products that are affordable.
While there hasn’t been “a huge change in category consumption,” consumers have been making more Nature Valley and Yoplait yogurt purchases. The company has benefited from consumers eating at home more, Harmening added.
General Mills said Wednesday that it expects sales for the fiscal 2024 year to range between a decline of 1% and flat, with earnings per share to increase 4% to 5%.
General Mills’ earnings provided the latest glimpse into consumer spending habits and sentiments. Some of its competitors, such as consumer goods company Procter & Gamble and food company Kraft Heinz, have yet to report earnings. Those companies are scheduled to post their quarterly earnings in April and May, respectively.
General Mills has seen a C-suite shakeup in recent months. In early February, Shawn O’ Grady, group president for the company’s North American Foodservice division, said he would retire this summer after more than three-decades with the company.
And in January, General Mills said Benno O. Dorer, who previously held marketing and sales roles at Procter & Gamble, and John G. Morikis, a former Sherwin-Williams executive chairman, would join the company’s board of directors.