Huge gains in sales, profits at General Mills as people at home ate everything it makes

©Star Tribune (Minneapolis)

Flour, including the Pillsbury and Gold Medal brands of General Mills, was in huge demand during the March through May period. - Dreamstime/Minneapolis Star Tribune/TNS

MINNEAPOLIS — General Mills Inc.’s latest profit rose 10% and its sales rose 21%, huge gains of a kind rarely seen at a large food company, as consumers gobbled up the company’s cereals, snacks and baking goods while spending more time at home to fend off coronavirus.

But the ongoing economic downturn has made executives cautious about the coming months. General Mills declined to offer guidance to investors on expectations for its new fiscal year, which started June 1.

Its shares fell 2% in premarket trading indications on a morning when the broader market appeared to be heading for a decline.

The Golden Valley, Minn.-based company was getting about 85% of its sales from people buying food for home consumption before the pandemic. That put it in a strong position to gain from the sudden shift in food consumption that began in March when tens of millions of Americans started working and attending school from home.

In March, April and May, the last quarter of its fiscal year, General Mills experienced a surge in demand across all its product categories. The company initially sold out of many products, particularly flour, baking mixes and soups, before ramping up production and adjusting its output to the most popular goods.

The results announced Wednesday provided the first numerical details on the shift. For a company that typically experience single-digit changes in demand, the change is stunning.

In the U.S., the company’s biggest market, General Mills experienced a 75% jump its meals and baking goods, 26% jump for cereals, 10% for snacks and 10% for yogurt.

And the Blue Buffalo pet food business, which it acquired about two years ago, experienced a 37% increase in sales during the period, though a portion of that was due to a calendar change in the way that unit’s sales are accounted.

Chief executive Jeff Harmening said the company’s rapid production and marketing changes in March and April increased its overall agility and ability to get its products in front of customers. He praised employees and said the company gained market share in most of its product categories.

“These changes set us up to deliver continued strong results in the months and years to come,” he said in a presentation for investors Wednesday.

A year ago, General Mills said they aimed to raise its organic sales, meaning sales achieved without boosts from acquisitions, maintain the company’s profit margins and reduce its leverage. Before the effects of the pandemic, Harmening said the firm was on track to achieve those goals but with the huge boost in fourth-quarter sales, it surpassed all of them.

Even so, what Harmening called the “significant uncertainty” in the balance between in-home and out-of-home food demand is leading General Mills to stay away from specific financial forecasts for the rest of 2020.

“While consumer demand will depend largely on external factors, we will focus on what we can control: namely, to compete effectively everywhere we play,” Harmening said.

In the latest quarter, General Mills earned $626 million, or $1.02 a share, on sales of $5.02 billion.

Adjusted for the effects of currency changes and a tax adjustment, the company’s profit amounted to $1.10 a share, beating the consensus forecast by analysts of $1.06 a share.

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©2020 Star Tribune (Minneapolis)