General Mills Updates Targets For Fiscal 2015 Growth And Multi-Year Cost Savings Initiatives

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Nov 07, 2014, 08:31 ET

MINNEAPOLIS, Nov. 7, 2014 /PRNewswire/ -- General Mills (NYSE: GIS) said today that in response to continued weak food-industry trends in the U.S. and slowing growth in key emerging markets, the company is reducing its sales and earnings expectations for the fiscal year ending in May 2015.

General Mills fiscal 2015 net sales in constant currency are now expected to grow at a low single-digit rate from the 2014 base of $17.9 billion. This includes an estimated 2 points of sales growth from the 53^rd week in fiscal 2015 and approximately $120 million of incremental sales from the Annie's organic and natural food businesses acquired Oct. 21, 2014. Annie's will be consolidated into General Mills' 2015 results on a one-month lag basis.

Total segment operating profit in constant currency is expected to decline at a low single-digit rate from prior-year results of $3.15 billion. This includes more than $400 million in cost of goods savings from holistic margin management (HMM), along with $40 million in savings from projects initiated this year to streamline the company's North American supply chain and further reduce overhead costs.

Fiscal 2015 adjusted diluted earnings per share are expected to grow at a low single-digit rate in constant currency from the base of $2.82 earned in fiscal 2014. This includes an estimated contribution from Annie's of one cent per share. Adjusted diluted earnings per share for the second quarter ending Nov. 23, 2014, are expected to be between $0.75 and $0.77. This compares to adjusted diluted EPS of $0.83 earned in the prior year's second quarter.

Previously, General Mills had been targeting mid single-digit constant-currency growth in net sales and segment operating profit, and high single-digit constant-currency growth in adjusted diluted EPS for fiscal 2015.

General Mills said that its International and Convenience Stores & Foodservice operating segments remain on track to achieve their full-year operating profit growth targets for fiscal 2015. The company's U.S. Retail operating segment is now expected to show an operating profit decline for fiscal 2015. In Nielsen-measured U.S. retail outlets, General Mills fiscal 2015 year-to-date (YTD) sales are growing in key categories such as yogurt, grain snacks, fruit snacks and frozen pizza. The company's YTD market shares are flat or up in categories representing 75 percent of the company's sales volume in measured outlets. Businesses posting market share increases include cereal, yogurt, grain and fruit snacks, ready-to-serve soup, and frozen pizza and hot snacks. General Mills' YTD composite dollar share in measured outlets is 15 basis points below the prior year, led by market share declines in frozen vegetables and dessert mixes. The company is making tactical adjustments in its marketing plans for these categories in response to competitive activity.

Update on Recently Announced Cost Savings Initiatives
In June 2014, General Mills announced the initiation of projects designed to generate cost savings and fuel accelerated topline growth for the company. These projects focus on streamlining the company's North American supply chain network and reducing overhead costs. Together, these initiatives are expected to generate $40 million in cost savings in fiscal 2015. The company said today that by fiscal 2016, cumulative annual savings from these efforts are expected to total between $260 and $280 million. Cumulative annual savings in fiscal 2017 are expected to exceed 2016 levels.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on our current expectations and assumptions. In particular, our predictions about future net sales and earnings could be affected by a variety of factors, including: competitive dynamics in the consumer foods industry and the markets for our products, including new product introductions, advertising activities, pricing actions, and promotional activities of our competitors; economic conditions, including changes in inflation rates, interest rates, tax rates, or the availability of capital; product development and innovation; consumer acceptance of new products and product improvements; consumer reaction to pricing actions and changes in promotion levels; acquisitions or dispositions of businesses or assets; changes in capital structure; changes in the legal and regulatory environment, including labeling and advertising regulations and litigation; impairments in the carrying value of goodwill, other intangible assets, or other long-lived assets, or changes in the useful lives of other intangible assets; changes in accounting standards and the impact of significant accounting estimates; product quality and safety issues, including recalls and product liability; changes in consumer demand for our products; effectiveness of advertising, marketing, and promotional programs; changes in consumer behavior, trends, and preferences, including weight loss trends; consumer perception of health-related issues, including obesity; consolidation in the retail environment; changes in purchasing and inventory levels of significant customers; fluctuations in the cost and availability of supply chain resources, including raw materials, packaging, and energy; disruptions or inefficiencies in the supply chain; volatility in the market value of derivatives used to manage price risk for certain commodities; benefit plan expenses due to changes in plan asset values and discount rates used to determine plan liabilities; failure or breach of our information technology systems; foreign economic conditions, including currency rate fluctuations; and political unrest in foreign markets and economic uncertainty due to terrorism or war. The company undertakes no obligation to publicly revise any forward-looking statement to reflect any future events or circumstances.

We have included measures in this release that are not defined by generally accepted accounting principles (GAAP). Total segment operating profit and diluted EPS excluding certain items affecting comparability are each reconciled in the tables below to the relevant GAAP measure.

	Fiscal Year
	2014
Operating profit:
U.S. Retail	$ 2,311.5
International	535.1
Convenience Stores & Foodservice	307.3
Total segment operating profit	3,153.9
Unallocated corporate items	196.2
Divestiture (gain)	(65.5)
Restructuring, impairment, and other exit costs	3.6
Venezuela currency devaluation	62.2
Operating Profit	$ 2,957.4

	Quarter Ended	Fiscal Year
Per Share Data	November 24, 2013	2014
Diluted earnings per share, as reported	$ 0.84	$ 2.83
Mark-to-market effects	(0.02)	(0.05)
Divestiture (gain)	-	(0.06)
Restructuring costs	0.01	0.01
Venezuela currency devaluation	-	0.09
Diluted earnings per share, excluding certain items affecting comparability	$ 0.83	$ 2.82