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.
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 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.
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.
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