GIS Shows Strength in Sales

For Thomas' preview heading into the General Mills conference call, please click here.

General Mills (GIS Quote - Cramer on GIS - Stock Picks) reported EPS, excluding the mark-to-market impact of its commodities hedges, of 96 cents, 19% over the 88 cents last year. On a reported basis, EPS was 79 cents vs. 81 cents last year. Sales rose 14% vs. a 7% consensus expectation, with double-digit sales increases in just about every major category. Volume rose 4%. Price mix was 9% and currency 1%.

Without the effect of hedges, the gross margin percentage was down 100 basis points, to 36.7%, rather than the decline reported from 37.7% to 34.1%. Segment operating profit was up 9%.

U.S. retail segment sales grew 14% on 6% pound volume. In spite of a 16% increase in marketing, operating earning were up 11%. Cereal industry sales growth was up a strong 5%, including non-measured outlets.

International segment sales rose 15%, 9% net of currency effect. Volume was flat, and operating profit rose 11%. Canada was up 9%, Europe 14%, Asia-Pacific 26%, and Latin America 14%.

Bakeries and Foodservice had a 17% sales gain, mostly on price increases. Pound volume declined 5%, which is the mirror-image of the increased eating at home expenditures that are pushing the sales in the U.S. retail segment. Segment operating profits were $27 million vs. $38 million last year.

In international, JVs CPW rose 21% and Haagen-Dazs in Japan grew 7%. On an adjusted basis, earnings here were up 26%.

Full-year EPS guidance was raised from a range between $3.78 and $3.83 to a new range between $3.81 and 3.85, with the expectation of sales growing in the mid single digits, primarily by price and mix. Operating profit is expected to grow in the mid single digits as well. This guidance looks conservative and allows some hit by my private-label concerns, which, for General Mills, are more 2010 and beyond focused. Commodities cost increases of 9% are still expected but are more first-half loaded. The mark-to-market effect of commodities positions is not in the guidance.

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