General Mills Stock Sags as Earnings Fall Short

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General Mills said it expects comparable sales to rise by 3.5% this fiscal year.

Daniel Acker/Bloomberg

General Mills

stock is falling as investors digest mixed fiscal third-quarter results from the packaged-food company. Per-share earnings were lower than expected for the first time in nearly four years, but management said it plans to resume buying back stock.

General Mills (ticker: GIS) said it earned $595.7 million, or 96 cents a share, up from 74 cents in the year-earlier period. On an adjusted basis, which excludes nonrecurring items like product recalls, mark-to-market gains and losses, and investment activity, the per-share profit was 82 cents. Revenue climbed 8% year over year to $4.52 billion, while analysts were looking for EPS of 84 cents and revenue of $4.45 billion.

The maker of breakfast cereal and pet foods expects comparable sales to climb 3.5% for the current fiscal year, although it warned that comparisons will be difficult in the fiscal fourth quarter, given that sales surged at this time last year as Covid-19 lockdowns prompted people to stock up on groceries.

The news comes after General Mills said late Tuesday that it plans to take full control of its Yoplait brand in Canada. The company is selling its 51% controlling interest in Yoplait to the French dairy cooperative Sodiaal in exchange for Sodiaal’s 49% stake in Yoplait Canada Holding Co. General Mills will also be able to distribute its Yoplait and Liberte brands in the U.S. and Canada royalty free.

General Mills was off 3.7% to $58.92 in premarket trading. The shares have gained just over 4% year to date, after a 28.4% rally in the past 12 months.

The company, like its packaged-food peers, has been facing increasing scrutiny of late, as investors look for indications that it will continue to benefit even after mass vaccination puts an end to the Covid crisis. A lower-than-expected profit doesn’t do much to assuage fears about slowing momentum.

Still, many industry experts believe that at-home food consumption will remain high even after the pandemic. Those optimistic about the stock will point to the resumption of share buybacks as a positive indicator.

On the other hand, consumer-staples stocks, often sought after for their dividends—General Mills’ yield is 3.3%—face pressure as interest rates rise on investments such as Treasury debt. Commodity prices and transportation costs are also on the rise, squeezing margins.

Write to Teresa Rivas at [email protected]

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