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General Mills Inc cut its organic-sales-growth outlook after slower-than-expected volume recovery and cautious consumer behaviour lowered expectations for the full year.
“We’re seeing consumers continue to display stronger-than-anticipated value-seeking behaviors across our key markets, and this dynamic is delaying volume recovery in our categories,” Chief Executive Officer Jeff Harmening said in prepared remarks. The company has also faced stiffer competition on store shelves, putting short-term pressure on market share, he said.
Fiscal second-quarter volume fell 4 percentage points, with the pet segment showing the largest decline, followed by North American retail.
Net sales in the pet business fell 4%, driven by a mid-single-digit drop for dry food and a double-digit decline for wet food compared with the prior year.
The premium pet-food business, such as the company’s Wilderness product line, took a hit, though the pet-treat business got a boost from the introduction of seasonal items and a less-expensive option. On the company’s call with analysts, Harmening said that on-shelf supplies from competitors, especially from private label and smaller players, increased faster than anticipated.
The company also faces tough comparisons in the second half of its fiscal year for pet food, he said.
The Minneapolis-based company now expects organic net sales growth in a range of flat to down 1%, compared with a previous range of 3% to 4% growth. General Mills also trimmed its outlook for adjusted operating profit and adjusted earnings per share, to an increase of 4% to 5%.
Shares fell 2.2% to $65.26 in New York trading. The stock had dropped 20% for the year through previous close, while the S&P 500 Index rose 24%.