General Mills – the makers of Cheerios – topped market expectation for sales and profit in the third quarter as increased prices offset slower demand, it was reported today.
The maker of breakfast cereals, snack bars and pet food products saw shares rise 3% in premarket trading.
This occurred after it reaffirmed its annual sales and profit targets for a third time this year.
Price Hikes
The past two years have seen staple food makers benefit from consistent price hikes.
Increases have helped protect profit margins as costs for raw materials, labour and supply chains have gone up.
Staple products have also benefitted from little pushback from customers, unlike other “affordable luxury” brands such as PepsiCo and Monster.
However, inflation and high borrowing costs have made customers more cautious with spending on branded products.
Shoppers have instead been opting for cheaper private label products that are getting more shelf space in retailers.
General Mills’ gross margins rose 100 basis points year-on-year to 33.5%. This was helped by an increase in organic average selling prices in the third quarter.
Yet the company’s quarterly organic volumes declined, joining brands such as Kraft Heinz in seeing lower demand.
Forecasts
In February, the company maintained its forecast, which it had previously reiterated in September.
In the third quarter, General Mills recorded $31 million net recoveries, due to a voluntary recall of certain international Häagen-Dazs products in 2023.
Net sales dropped approximately 1% to $5.1 billion in the same quarter.
Analysts’ expectations had been a 3.1% sales drop to $4.97 billion, according to London Stock Exchange Group.
The company earned $1.17 per share – excluding one-off charges – in the quarter ending 25 February.
This was above estimates of $1.05 per share.
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