MINNEAPOLIS, Dec. 20, 2016 /PRNewswire/ -- General Mills reported results for the second quarter ended November 27, 2016.
"Although we posted disappointing net sales performance in the second quarter, we delivered good growth in adjusted diluted EPS, driven by significant expansion in our adjusted operating profit margin," said General Mills Chairman and Chief Executive Officer Ken Powell. "Our organic sales declines reflect the actions we've taken to optimize our spending and prioritize profitable volume, as well as weakening food-industry trends in the U.S. We're making targeted adjustments to our plans in the second half to improve our topline performance while still delivering our margin expansion and EPS growth commitments. We remain confident that our strategy of investing behind Consumer First ideas – while driving strong margin expansion – will generate long-term sustainable growth, robust cash flow, and top-tier returns for our shareholders."
Second Quarter Results Summary
- Reported net sales declined 7 percent to $4.1 billion due to lower organic net sales and the divestiture of the North American Green Giant business. Organic net sales declined 4 percent, with volume reductions in the U.S. Retail and International segments partially offset by benefits from positive net price realization and mix.
- Gross margin increased 220 basis points to 37.0 percent of net sales, reflecting benefits from cost savings initiatives, favorable mark-to-market effects, and lower restructuring expenses. Adjusted gross margin, which excludes certain items affecting comparability, increased 130 basis points to 36.8 percent, driven by cost savings efforts more than offsetting benign input cost inflation.
- Operating profit totaled $769 million, down 15 percent from year-ago levels that included a gain from the divestiture of Green Giant in North America. Operating profit margin of 18.7 percent was down 180 basis points. Adjusted operating profit margin increased 160 basis points to 19.6 percent, reflecting higher gross margins and a 20 percent reduction in media and advertising expense.
- Total segment operating profit of $830 million was down 1 percent. Total segment operating profit essentially matched year-ago results in constant currency.
- Net earnings attributable to General Mills totaled $482 million. Diluted EPS were $0.80, down 8 percent driven by last year's gain from the divestiture of Green Giant in North America.
- Adjusted diluted EPS, which excludes certain items affecting comparability of results, totaled $0.85 in the second quarter, up 4 percent from the prior year. Constant-currency adjusted diluted EPS increased 5 percent.
Six Month Results Summary
- Reported net sales declined 7 percent to $8.0 billion and organic net sales declined 4 percent.
- Gross margin increased 70 basis points to 36.6 percent of net sales. Adjusted gross margin increased 50 basis points to 37.1 percent.
- Operating profit totaled $1.4 billion, down 11 percent from the prior year. Operating profit margin of 17.6 percent was down 80 basis points. Adjusted operating profit margin increased 120 basis points to 19.4 percent.
- Total segment operating profit of $1.6 billion was down 3 percent. On a constant-currency basis, total segment operating profit declined 2 percent.
- Net earnings attributable to General Mills totaled $891 million. Diluted EPS were $1.47, down 6 percent from a year ago.
- Adjusted diluted EPS increased 1 percent to $1.63. Constant-currency adjusted diluted EPS were up 2 percent.
U.S. Retail Segment
Second-quarter net sales for General Mills' U.S. Retail segment totaled $2.52 billion, down 9 percent from the prior year with an increase in the Snacks operating unit more than offset by declines in the other units. Organic net sales declined 6 percent. Increases in Annie's and Lärabar natural and organic products, Old El Paso Mexican products, and Totino's frozen hot snacks were offset by declines in Yoplait yogurt, Pillsbury refrigerated dough, and Progresso soup. Segment operating profit increased 2 percent, primarily driven by benefits from cost savings initiatives and a decrease in media and advertising expense.
Convenience Stores and Foodservice Segment
Second-quarter net sales for the Convenience Stores and Foodservice segment declined 4 percent to $488 million, with increases for the yogurt, mixes, and cereal platforms offset by market index pricing on bakery flour. Organic net sales were also down 4 percent. Segment operating profit increased 6 percent in the quarter, reflecting benefit from cost savings initiatives, lower input costs, and higher grain merchandising earnings. Full report.
