General Mills (GIS) impressed with its margin performance during its last reported quarter. GIS improved its gross and operating profit margins in the fiscal fourth quarter despite significant pressure from continued inflation in its input and logistics costs. General Mills’ adjusted gross margin expanded 70 basis points, while its adjusted operating profit margin increased 170 basis points during the fiscal fourth quarter.
Among its peers, Conagra Brands (CAG) and Mondelēz (MDLZ) also impressed with their recent margin performance, thanks to measures to improve productivity, cost savings, and higher net price realization. During the last reported quarter, Conagra Brands’ adjusted operating margin expanded by ~139 basis points. Mondelēz’s operating margin expanded by 130 basis points.
General Mills’ fiscal first-quarter margins are expected to benefit from its higher net price realization and favorable product mix. Also, productivity savings are expected to support its gross margins. However, input cost inflation, higher transportation costs, and soft organic sales could subdue its margins.
The company’s management expects its gross margin rate for fiscal 2019 to remain flat or mark year-over-year improvement. Cost and productivity savings, higher pricing, and favorable mix are expected to drive its gross profit margins for the fiscal year. However, cost pressure and planned investments in its brand-building initiatives could weigh on its margins.