Shares of General Mills (GIS) - Get Report fell 3.04% to $61.14 in mid-morning trading on Tuesday after the food company reported weaker-than-expected earnings and revenue for the 2017 fiscal second quarter, hurt by its U.S. yogurt and meals segments.
Before the market open, the Minneapolis-based maker of Cheerios cereal and Yoplait yogurt also cut its full-year organic sales guidance. It now sees a decline of 3% to 4%, below its previous outlook ranging from flat to a decrease of 2%. Additionally, fiscal 2017 operating profit is now expected to rise 2% to 4%, down from its prior view for growth of 6% to 8%.
For the fiscal second quarter, General Mills posted adjusted earnings of 85 cents per share, missing analysts' estimates by one cent. Revenue slid 7% to $4.11 billion from last year and fell short of analysts' projections of $4.22 billion.
"Although we posted disappointing net sales performance in the second quarter, we delivered good growth in adjusted diluted EPS, driven by significant expansion in our adjusted operating profit margin. Our organic sales declines reflect the actions we've taken to optimize our spending and prioritize profitable volume, as well as weakening food-industry trends in the U.S.," CEO Ken Powell said in a statement.
U.S. retail segment net sales, which is its largest unit, dropped 9% to $2.52 billion year-over-year. Snacks sales increased 1%, while cereal and baking products declined 3% and 7%, respectively. Yogurt and meals each tumbled 17% during the period.
Growth in the company's Annie's and Lärabar natural and organic products, Old El Paso Mexican products and Totino's frozen hot snacks were offset by declines in Yoplait yogurt, Pillsbury refrigerated dough and Progresso soup.
On the earnings call this morning, COO Jeffrey Harmening said the company's five largest categories - cereal, yogurt, snack bars, refrigerated dough and soup - fell short of expectations. Executives cited a lack of marketing support, meaning the combination of trade, media and new product news, to drive improved top-line results.
However, Harmening noted General Mills saw good consumer response, such as in its gluten-free Cheerios cereal and removal of artificial ingredients.