General Mills (NYSE: GIS) today reported results for the first quarter of fiscal 2014. The period includes three months of incremental contribution from new businesses (Yoplait Canada, Yoki Alimentos and Immaculate Baking Company) added in the previous year.
Fiscal 2014 First Quarter Financial Summary
Net sales rose 8 percent to $4.37 billion, with new businesses contributing 5 percentage points of the growth. Segment operating profit grew 6 percent to $812 million, including a 7 percent increase in advertising and media investment. Diluted earnings per share (EPS) totaled 70 cents, below year-ago results that included a net benefit from a discrete tax item and higher mark-to-market valuation of certain commodity positions. Adjusted diluted EPS, which excludes certain items affecting comparability, totaled 70 cents this year compared to 66 cents in last year's first quarter. (Please see Note 8 below for reconciliation of this non-GAAP measure.)
Net sales for the 13 weeks ended Aug. 25, 2013, grew 8 percent to $4.37 billion. Pound volume grew 8 percent, primarily reflecting acquisitions. Price realization and mix contributed 1 point of net sales growth, and foreign exchange subtracted 1 point of growth. Gross margin was below year ago levels, reflecting changes in mark-to-market valuation of certain commodity positions, input cost inflation and the change in business mix. Advertising and media expense was 7 percent higher than year-ago levels. Total segment operating profit grew 6 percent to $812 million (please see Note 8 below for reconciliation of this non-GAAP measure). First-quarter net earnings attributable to General Mills totaled $459 million and diluted earnings per share totaled 70 cents. These results were below year-ago levels that included a net benefit of 16 cents per share from several discrete items. Adjusted diluted EPS, which excludes certain items affecting comparability, totaled 70 cents in the first quarter of fiscal 2014, up 6 percent compared to 66 cents a year ago (please see Note 8).
Chairman and Chief Executive Officer Ken Powell said this performance represented a solid start to the new fiscal year. "In particular, our net sales growth in the quarter reflects a healthy mix of gains from established brands, strong introductory shipments for new products, and contributions from new businesses added to our portfolio. These first-quarter results have us on track to achieve the key financial targets we've set for fiscal 2014."
New products contributing to net sales growth in the quarter included Yoplait Greek yogurt, Nature Valley Soft-baked Oatmeal Squares, Honey Nut Cheerios Medley Crunch cereal, Pillsbury gluten-free refrigerated dough products, new Helper dinner mix varieties and, in Brazil, new Yoki Kit Facil dinner mixes. Established brands including Lucky Charms and Cinnamon Toast Crunch cereals, Progresso Light ready-to-serve soups, Yoplait Greek 100 calorie yogurt, Totino's frozen pizza and snacks, Larabar fruit and nut energy bars and, in China, Wanchai Ferry frozen dumplings and dim sum varieties, also contributed to net sales growth.
U.S. Retail Segment Results
First-quarter net sales for General Mills' U.S. Retail segment totaled $2.58 billion, up 4 percent from a year earlier. Pound volume grew 1 percent, and net price realization and mix contributed 3 percentage points of net sales growth. The Snacks, Big G, Baking Products and Small Planet Foods divisions each contributed to the U.S. Retail segment net sales increase, and Yoplait and Frozen Foods division net sales matched year-ago results. Meals division net sales declined slightly. U.S. Retail segment advertising and media expense increased 4 percent from year-ago levels, and segment operating profit grew 6 percent to $612 million.
International Segment Results