General Mills sees tepid annual profit, posts Q4 sales decline as demand falters
Updates shares, adds executive comment in paragraph 4
By Anuja Bharat Mistry
June 26 (Reuters) -Cheerios cereal maker General Mills GIS.N forecast annual profit below estimates on Wednesday and posted a bigger-than-expected drop in quarterly sales hurt by lower demand for its snack bars and pet food, as well as higher input costs.
The company also expects annual dollar value growth in its businesses to be below its long-term projections, pushing its shares down by about 4%.
General Mills hasstruggled with lower volumes and retailers cutting down on inventory, while facing ongoing competition from lower-priced private labels that have been eating into its market share.
"We expect ongoing macroeconomic uncertainty to result in continued value-seeking behaviors by consumers, affecting both the products they buy and the channels they shop," CEO Jeff Harmening said, adding that the company has more work to do to improve competitiveness.
Net sales at General Mills' North America retail segment, the company's biggest revenue contributor, fell 7% in the quarter ended May 26 due to a 6 percentage point drop in volumes.
"Value-oriented consumers have learned that trading down to lower-priced private labels doesn't mean sacrificing quality," said Zak Stambor, an analyst with eMarketer, adding that this is a growing concern for companies like General Mills.
Peers WK Kellogg KLG.N and Kraft Heinz KHC.O have also reported pressured volumes, while competitor Campbell Soup CPB.N reported an upbeat quarter and raised its forecast owing to demand recovery and improvement in volumes.
General Millshas also been pressured by higher input costs, such as sugar and labor, as well as supply chain disruptions.
The company expectsfull-year adjusted profit to be between down 1% and up 1%, compared with analysts' estimates of a 3.7% rise, according to LSEG data.
The company's quarterlynet sales fell by a steeper-than-expected 6% to$4.71 billion.
On an adjusted basis, the company earned $1.01 per share, edging past estimates.
Reporting by Anuja Bharat Mistry in Bengaluru; Editing by Tasim Zahid
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