Strong 1Q For General Mills, Inc. (NYSE:GIS)


General Mills, Inc. (NYSE:GIS) reported a strong F1Q2016 in which net income rose 25% year-over-year, beating the consensus estimate in the process. Strong retail sales in the U.S. and continued cost optimization helped to contribute to the improvement of the bottom-line. Overall, sales fell slightly because of adverse currency fluctuations.

General Mills, Inc. (NYSE:GIS) posted net income of $426.6 million or $0.69 a share in its first quarter 2016. In the same period last year, net income was $345.2 million or $0.55 a share. Adjusting for one-time impacts, F1Q2016 EPS came in at $0.79, above the consensus estimate of $0.69.

Overall sales dipped 1% year-over-year because of unfavorable foreign exchange movements to come in at $4.21 billion. Discounting the currency fluctuation effect, sales were up 4%. Nevertheless, sales missed the consensus estimate of $4.25 billion.

Annie’s, which General Mills acquired last fall, contributed half of the sales growth in the quarter after adjusting for the currency impact.

US business

In the U.S., retail sales rose 4% to come in at $2.53 billion, helped by improvements in the cereal business, which has been declining in recent times. General Mills’ U.S. cereal sales in the latest quarter rose 6% year-over-year. General Mills and Kellogg Company (NYSE:K) each control nearly 30% of the U.S. cereal market.

International

International sales in the first quarter were $1.2 billion, down 11% because of foreign exchange impact, but up 5% when currency movement effects are discounted.

Cost-cutting

Easily comparable numbers from a year ago and continued cost-cutting helped to boost General Mills, Inc. (NYSE:GIS) bottom-line numbers. In the latest quarter, expenses and costs related to selling, general and administrative were down 6% year-over-year, which was a greater improvement than most analysts expected.

The company has cut more than 2,500 jobs and is looking to save between $285 million and $310 million in costs in fiscal year 2016 courtesy of its ongoing cost curtailment programs.

Hiccups in China

The economic slowdown in China is a headwind for General Mills, Inc. (NYSE:GIS), but the management says that there still exist compelling growth opportunities in China. Sales in China fell in the last quarter, a development that was contributed to by adverse currency movements.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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