In every situation, there is a side that sees gain and a
side that sees pain. The COVID-19 pandemic is no exception. On one side, there are
certain companies that have benefited from the ongoing health crisis while on
the other side, there are some high-performers who took a hard kick to their guts
during this period.
General Mills (NYSE: GIS) belongs to the first group. The company’s fourth quarter 2020 earnings results benefited from strong at-home food demand trends giving a nice end to the fiscal year.
Performance
During the fourth quarter, General Mills saw a remarkable increase in the demand for food at home and a decrease in demand for food away from home as people preferred to stay and dine indoors rather than eat out. This helped drive a growth in net sales of 21% for the quarter and 5% for the full year.
Sales for fiscal year 2020 totaled $17.6 billion, which
compares to $16.8 billion reported in fiscal year 2019. Prior to the pandemic, the
at-home food category made up around 85% of the company’s net sales while
away-from-home comprised the remaining 15%.
The North America Retail segment benefited significantly from
the at-home food demand with an increase of 36% during the fourth quarter, particularly
in categories such as meals, baking and cereal.
For the full year of 2020, North America Retail delivered 8%
sales growth. The US Cereal category delivered retail sales growth for the third
consecutive year, gaining 70 basis points of share for the full year. This was
driven mainly by the Cheerios franchise which grew retail sales and market
share in the fourth quarter aided by new product launches. In US Snacks, the
company’s focus on bars and fruit snacks paid off with meaningful growth in the
Snacks Bars market share throughout the year.
In fiscal year 2019, North America Retail sales dropped 2%
due to a decrease contributions from volume growth and unfavorable Forex
impacts. Sales in the US Cereal unit remained flat on a year-over-year basis
while the US Snacks segment recorded a decrease of 4%.
The decrease in away-from-home food impacted the Convenience
Stores & Foodservice and Asia & Latin America segments, both of which
registered declines of 24% and 12% respectively in the fourth quarter of 2020. Sales
for both these segments fell 8% each in the full year of 2020.
In 2019, sales for the Convenience Stores & Foodservice
segment increased 2% driven by favorable pricing and mix. Asia and Latin
America sales fell 3% due to unfavorable foreign currency exchange.
Outlook
Looking ahead into fiscal year 2021, General Mills expects the balance of at-home and away-from-home consumer food demand to be the largest factor impacting its performance. This balance will be determined by how far customers are willing and able to dine at restaurants, the number of people working from home, the reopening of schools and the income levels of people.
General Mills’ shares have gained over 15% since the beginning of the year and over 12% in the past three months.
Click here to read the full transcript of General Mills Q4 2020 earnings conference call