What Impacted General Mills’ Sales in Fiscal 1Q16?



Sales fell in fiscal 1Q16

General Mills’ (GIS) net sales for fiscal 1Q16 ending on August 30, 2015, fell by 1% to $4.2 billion. The foreign currency exchange effect caused the growth to fall by five percentage points. On a constant currency basis, the net sales improved by four percentage points, including two points of growth. The company’s acquisition of Annie’s Homegrown in October 2014 contributed to the growth. The volume and price or mix added another 4% to the net sales growth. The constant-currency net sales rose by 9% for Haagen-Dazs Japan. The constant currency net sales fell by 2% for Cereal Partners Worldwide. The sales missed analysts’ estimates by 1%. Analysts project net revenue of $4.6 billion for fiscal 2Q16.

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Segments’ sales improved

The company operates in three segments:

  1. US Retail
  2. International
  3. Convenience and Foodservice

The US retail segment’s revenue was $2.5 billion—up by 4% from the previous year. Various factors contributed to this growth including one percentage point from the pound volume and three percentage points of growth from the net price realization and mix. Annie’s Homegrown also contributed three percentage points to the net sales growth. The segment’s net sales outpaced the consumer movement. The company expects stronger consumer movement even in the second quarter.

The fiscal 1Q16 net sales for the convenience stores and foodservice segment rose by 1% to $478 million. This showed an increase in the pound volume. Snacks, frozen meals, mixes, and cereal were responsible for the segment’s sales performance in the quarter.

In fiscal 1Q16, the net sales for international businesses rose by 5% in constant currency terms. On a reported basis, the net sales fell by 11% to $1.2 billion. The foreign currency exchange reduced the net sales growth by 16%. The pound volume added four percentage points of net sales growth while the net price realization and mix added one percentage point of growth. The international segment’s constant currency net sales rose by 7% in Europe, 5% in Canada, 3% in the Asia-Pacific region, and 3% in Latin America.

Peers’ performance

General Mills’ main peers include J.M. Smucker (SJM), Bunge (BG), and Flowers Foods (FLO). They recorded net revenue of $2,078 million, $10.8 billion, $885 million in their last reported quarter, respectively. The Guggenheim S&P Equal Weight Consumer Staples ETF (RHS) invests 2.7% in J.M. Smucker. The Power Shares S&P 500 Low Volatility Portfolio (SPLV) invests 1.0% of its portfolio in J.M. Smucker.


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