General Mills net sales increase on higher pricing

USA—General Mills shares have hit a new all-time high after reporting positive fourth quarter and full year Fiscal 2022 results, owing to higher pricing.

Net sales increased 8% to US $4.89 billion in the fourth quarter, beating estimates of US $4.81 billion, according to Refinitiv IBES.

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Despite the persistent inflationary pressures and supply chain constraints, the food manufacturer has successfully steered the quarter by taking proactive steps of increasing prices and reshaping its portfolio.

The Cheerios maker also raised its quarterly dividend, sending shares up 5.5% as demand for its breakfast cereals, snack bars and pet food held steady despite the price hikes.

“As consumers become more concerned about the economic reality, the first thing they tend to do is eat more at home,” Chief Executive Officer Jeff Harmening said.

People have cooked more at home during economic downturns in the past, at a fraction of a restaurant meal’s cost, and “we are seeing the same kind of behavior now”, he added.

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“We plan to build on our strong momentum in fiscal 2023 by continuing to compete effectively, investing in our brands and capabilities, and reshaping our portfolio,” Harmening added.

U.S. packaged food makers have jacked up prices of everything from condensed soup to chocolates to protect profit margins from a rise in freight and raw material expenses.

Based on the ongoing inflationary environment, the reduced purchasing power of consumers, and supply chain challenges, General Mills expects double-digit inflation pressure on its cost of goods sold in 2023. Meanwhile, supply chain issues are expected to moderate compared to FY22.

General Mills expects input costs to rise about 14% in fiscal 2023 from 8% in the reported year.

For FY23, GIS forecasts organic net sales to grow by four to five percent, and adjusted earnings are expected to remain between flat and grow by 3% over the FY22 figure.

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Barclays analyst Andrew Lazar said the outlook suggests a level of confidence in its ability to manage inflation despite the prevailing investor view that the pricing window for the packaged food industry has all but effectively shut.

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