General Mills reported higher-than-estimated quarterly profits and lifted its forecast for the year as it continues to restructure its brand portfolio.
The food manufacturing giant on Wednesday reported $1.11 per share in adjusted earnings for its fiscal first quarter, which ended Aug. 28, beating the consensus among analysts tracked by FactSet that the result would come in at $1. Sales rose 4% to $4.72 billion for the quarter, matching expectations as higher prices were partially offset by lower volumes.
General Mills' (ticker: GIS) solid report comes as the company continues to divest businesses to focus on brands that have better prospects for profitability. The maker of Cheerios cereal said that during the quarter, it completed the sale of the Helper and Suddenly Salad packaged food businesses for $607 million. It let go of its European yogurt business and certain international segments in the prior two quarters.
The company also acquired the pizza crust business TNT Crust for $253 million in the first quarter.
Sales in the latest quarter were helped by higher prices, even as the volume of products sold dropped. Packaged food makers have been steadily lifting prices , in order to make up for higher labor and freight costs. Shippers charged an average of roughly $10,000 to transport containers as recently as March, according to data from Freightos , a global freight-booking platform. Prices, though, have come down to around $5,000 since then.
As decades-high inflation pinches wallets, consumers have been shifting purchases to essential items. Grocery stores and food manufacturers are typically the beneficiaries of such moves away from discretionary goods. Earlier this month, Kroger (KR) raised its financial forecasts for the full fiscal year as wel l.
"General Mills looks resilient against the pressures of inflation and an economic downturn," said Shoggi Ezeizat, a consumer-sector analyst at Third Bridge. "[Its] spectrum of price points should provide sufficient options for its customers to trade down but not out of the General Mills range."
For all of fiscal 2023, General Mills expects adjusted earnings to grow by 2% to 5% on a currency neutral basis versus the prior year. That's higher than the previous prediction of flat to up to 3%. Organic net sales are now estimated to grow by 6% to 7%, compared to the previous expectation of 4% to 5% growth.
General Mills stock was 5.8% higher at $79.81 in early trading.