General Mills Inc. said higher prices helped lift sales in the recently ended quarter even as the food maker sold fewer items across the board.
The maker of Cheerios cereal and Betty Crocker cake mix on Wednesday posted an 8% increase in sales, to nearly $4.9 billion, for its fiscal fourth quarter ended May 29. Organic sales, which strip out effects from currency fluctuations and mergers, rose 13%.
Inflation isn't expected to let up soon: General Mills forecast costs to rise at a double-digit rate over the next year, with more cost cuts and price increases planned to try to protect profits.
The Minneapolis company said the latest sales increase was driven by higher prices and a more profitable mix of sales. That helped offset surging costs and lower sales volume in every segment except for the company's rapidly growing pet-products business.
General Mills Chief Executive Jeff Harmening said that the company was able to keep its brands in stores despite significant inflation and supply chain disruptions.
Also on Wednesday, the spice-and-flavorings company McCormick & Co. posted a 35% drop in profits in its recently ended quarter, as costs rose more quickly than it anticipated and price increases failed to stay ahead of inflation.
In response to higher costs and supply-chain challenges, General Mills and other food giants including Campbell Soup Co. and Conagra Brands Inc. have raised prices , contributing to higher grocery bills for consumers. The U.S. Bureau of Labor Statistics reported that prices for all food consumed at home rose 11.9% in May from a year earlier, the biggest 12-month increase since April 1979.
General Mills has been raising prices for its products through a variety of measures, including list price increases and changing packaging and sizes to charge more per ounce. It projects that sales will rise 4% to 5% in the current fiscal year.
Overall for the quarter, the company's profit nearly doubled to $822.8 million, or $1.35 a share, from $416.8 million, or 68 cents a share, in the same period a year earlier.
Stripping out the impact from divestitures and other one-time items, General Mills posted adjusted earnings of $1.12 a share. Analysts surveyed by FactSet expected adjusted earnings of $1.03 a share.
Sales of $4.89 billion were slightly ahead of analyst expectations.
At the same time, McCormick posted sales of $1.54 billion, below the $1.61 billion expected by analysts and down 1.3% from a year earlier. McCormick said sales benefited 7% from higher prices but that was offset by a similar decline in the amount of product sold.
The Hunt Valley, Md.-based company said that costs rose faster than expected in the latest quarter. CEO Lawrence Kurzius said the company expects higher prices and other efforts to outpace cost pressures in the second half of the year.
As a result of the higher costs, supply chain challenges and geopolitical issues, the company lowered its full-year adjusted earnings guidance to a range of $3.03 a share to $3.08 a share, down from the prior range of $3.17 a share to $3.22 a share.
It backed its view for sales to rise 3% to 5% this year, though it anticipates a hit of 2 percentage points to sales from unfavorable foreign-exchange rates, compared with a previous forecast of a 1 percentage point.
Overall for the second quarter ended May 31, McCormick's profit fell some 35% to $118.5 million, or 44 cents a share, from $183.7 million, or 68 cents a share, a year earlier.
Adjusted for divestitures and other one-time items, adjusted earnings were 48 cents a share, short of analyst estimates of 65 cents a share.