Categories Analysis, Consumer

Three key highlights from General Mills’ (GIS) Q3 earnings report

General Mills expects net sales for the fourth quarter of 2021 to be lower than the year-ago quarter

Shares of General Mills Inc. (NYSE: GIS) have gained 22% in the past one year. The company reported its earnings results for the third quarter of 2021 on Wednesday. Net sales rose 8% year-over-year to $4.5 billion, beating market expectations. Adjusted EPS rose 6% to $0.82 but fell short of estimates. The company benefited from higher demand for food-at-home and expects this trend to continue for the remainder of FY2021. Here are three key highlights from the earnings report:

Yoplait divestiture

General Mills is planning to sell its 51% controlling stake in Yoplait SAS to French dairy cooperative Sodiaal in exchange for full ownership of the Canadian Yoplait business and a reduced royalty rate for use of the Yoplait and Liberte brands in the US and Canada. General Mills will receive Sodiaal’s 49% interest in Yoplait Canada which yielded net sales of $290 million in FY2020.

This deal is expected to improve the company’s growth profile and margins by helping it focus on the brands that have higher growth potential. General Mills estimates that its total compound annual net sales growth between FY2018 and FY2020 would have been around 25 basis points higher without the Yoplait Europe business. GIS expects the deal to close by the end of calendar year 2021 and to be around 1-2% dilutive to adjusted EPS in the first 12 months.

Blue Buffalo growth

Three years ago, General Mills acquired Blue Buffalo for $8 billion. Since then, Blue Buffalo’s net sales have grown at a 10% compound rate to over $1.7 billion and operating profit has grown at a 11% compound rate to more than $400 million.

About 40% of pet food is sold in the Food, Drug and Mass (FDM) channel. Since the acquisition, GIS has managed to increase its distribution in this channel to 86% from 22%. The company’s household penetration has nearly doubled and its market share has grown to around 7.7% in this category, which is seeing rapid growth.

The US pet food category has grown about 4% a year since GIS acquired Blue Buffalo and recent trends indicate the category will grow in the mid-single digits rate going forward. During the pandemic, there was an increase in demand for natural pet food, which currently represents around 30% of total pet food sales. Natural pet food grew 9% in calendar year 2020 and the company expects this category to see continued growth in the coming years.   


General Mills expects net sales for the fourth quarter of 2021 to be lower than the year-ago quarter. Last year, the company’s reported net sales grew 21% due to the stock-up driven by the COVID-19 pandemic, the fifty-third week and the extra month of Pet results. Organic net sales for Q4 2021 are estimated to be higher than Q4 2019 as at-home food demand will remain higher than pre-pandemic levels. For the full year of 2021, organic net sales are expected to increase approx. 3.5%.

Click here to read the full transcript of General Mills Q3 2021 earnings conference call

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