General Mills' Second Quarter 2014 C-Store, Foodservice Sales Drop 2 Percent

General Mills reported results for the second quarter of fiscal 2014, including second-quarter net sales for the convenience stores and foodservice down 2 percent from year-ago levels. The 13-week period ending Nov. 24, 2013 did not include Thanksgiving, while last year's second-quarter results included the holiday. Net sales of $4.88 billion essentially matched year-ago results. In last year's second quarter, net sales grew 6 percent. Segment operating profit of $920 million was 4 percent below strong year-ago results. In addition, diluted earnings per share (EPS) totaled 84 cents, up 2 percent from the prior year. Adjusted diluted EPS, which excludes certain items affecting comparability, totaled 83 cents this year compared to 86 cents in last year's second quarter.

Net sales for the second quarter of fiscal 2014 totaled $4.88 billion, with pound volume essentially matching prior-year levels. Net price realization and mix contributed 1 point of net sales growth. This was offset by the impact of foreign exchange translation, which reduced net sales growth by 1 percentage point. Second-quarter gross margin was above year-ago levels due to changes in mark-to-market valuation of certain commodity positions and grain inventories. Excluding mark-to-market effects, gross margin declined in the second quarter reflecting higher input costs. Advertising and media expense was 3 percent below year-ago levels. Total segment operating profit of $920 million was down 4 percent from prior-year results that grew 10 percent. Second-quarter net earnings attributable to General Mills totaled $550 million and diluted earnings per share grew 2 percent to 84 cents per share. Adjusted diluted EPS, which excludes certain items affecting comparability, totaled 83 cents per share in the second quarter of fiscal 2014 compared to 86 cents a year ago.

Net sales through the first six months of fiscal 2014 grew 4 percent to $9.25 billion. Incremental contributions from new businesses added during the prior year accounted for 2 points of the net sales increase. First-half segment operating profit of $1.73 billion essentially matched year-ago results. First-half diluted EPS totaled $1.54, down 6 percent from $1.64 a year ago. Adjusted diluted EPS totaled $1.53 for the first half of 2014 compared to $1.52 in last year's first half.

Second-quarter net sales for General Mills' U.S. retail segment declined 1 percent to $2.97 billion. Lower pound volume reduced net sales growth by 2 percentage points, while net price realization and mix contributed 1 percentage point of net sales growth. The Snacks, Small Planet Foods and Big G divisions each contributed net sales growth in the quarter, while net sales for the remaining U.S. retail divisions were lower. Advertising and media expense declined 1 percent in the period. Segment operating profit totaled $682 million, 6 percent below strong year-ago results.

Through the first six months of fiscal 2014, U.S. retail segment net sales grew 1 percent to $5.55 billion. Lower pound volume reduced net sales growth by 1 percentage point, while net price realization and mix contributed 2 percentage points to net sales growth. First half segment operating profit of $1.29 billion essentially matched year-ago results including a 1 percent increase in advertising and media expense.

Second-quarter net sales for the convenience stores and foodservice segment totaled $507 million, down 2 percent from year-ago levels due to negative net price realization and mix. Pound volume essentially matched year-ago levels. Segment operating profit totaled $85 million, down 12 percent from year-ago levels that grew 24 percent.

Through the first six months of fiscal 2014, convenience stores and foodservice segment net sales totaled $975 million, down 1 percent from the previous year due to a decline in pound volume. Segment operating profit of $159 million was 3 percent below year-ago results.

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