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
Most Popular
Important takeaways from Paychex’s (PAYX) Q2 2025 earnings report
Paychex Inc. (NASDAQ: PAYX), a leading provider of human resources and payroll services, reported better-than-expected revenue and profit for the second quarter of fiscal 2025, sending the stock higher soon
Lamb Weston’s (LW) challenges may not end soon, a few points to note
Shares of Lamb Weston Holdings, Inc. (NYSE: LW) turned red in mid-day trade on Friday. The stock has dropped 19% in the past one month. The company delivered disappointing results
CCL Earnings: Carnival Corp. Q4 2024 revenue rises 10%
Carnival Corporation & plc. (NYSE: CCL) Friday reported strong revenue growth for the fourth quarter of 2024. The cruise line operator reported a profit for Q4, compared to a loss