Sarina Penn
A pizza recall and mushrooming commodity costs ate into General Mills' (GIS Quote - Cramer on GIS - Stock Picks) bottom line for the fiscal second quarter, though the Minneapolis-based food maker still managed a slight profit rise over last year.
Helping that along was a 6.8% year-on-year sales climb to $3.7 billion, which edges out the $3.62 billion average analyst call from Thomson Financial. Mills' U.S. retail segment -- encompassing Pillsbury products, Yoplait yogurt and cereals such as Cheerios, among other things -- saw revenue grow 3%. Its snacks division, which makes Nature Valley and Fiber One bars, enjoyed a 12% top-line jump, and yogurt sales weren't far behind. But an E. coli scare in November forced a recall of several frozen pepperoni pizza products, costing the company $20 million and helping to pressure U.S. retail operating income down 2%. Bakeries and foodservice was the most disappointing segment, with operating income sliding 14% despite an 8% revenue jump. International operating earnings, however, leapt 36% thanks to surging sales and favorable foreign-exchange rates. All in all, Mills earned $390.5 million, or $1.14 a share, up from $385.4 million, or $1.08 a share, a year earlier. That includes a 4-cent charge from the pizza recall. Analysts, who typically exclude one-time items from their estimates, were looking for $1.13 a share. Rising costs for food ingredients helped pressure these results "significantly," said CEO Ken Powell, along with a double-digit hike in marketing costs. And commodity-cost inflation will probably continue at a higher rate in the second half than the company had originally thought.
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