Minneapolis / MN. (gm) In advance of investor discussions this week, General Mills Inc. is providing an update on its performance and outlook for the fiscal year ending May 31, 2020.
«During this difficult and unprecedented situation, I am incredibly proud of the way General Mills has stepped up to ensure a reliable food supply for our consumers and our communities,» said Jeff Harmening, General Mills Chairman and Chief Executive Officer. «Our company’s purpose is to make food the world loves, and in the current circumstances it is even more fundamental: we are making food the world needs. With consumers embracing food at home like never before, our front-line employees are working tirelessly to service this elevated demand while we take measures to ensure their safety. I am confident that our trusted, leading brands, our dedicated people, our differential capabilities, and our best-in-class execution will allow General Mills to emerge from this pandemic a stronger company.»
Operational Update
General Mills’ most important objectives are the continued health and safety of its employees and the ongoing ability to serve consumers around the world. The company has implemented rigorous employee safety measures, rooted in CDC and WHO guidance, across all its supply chain facilities, including proper hygiene, social distancing, mask use, and temperature screenings. To support employees who work at manufacturing facilities, the company has implemented incremental benefits and incentives. To date, all General Mills manufacturing and distribution facilities have continued to operate without significant disruption related to Covid-19.
In March, the company experienced an unprecedented increase in consumer demand for food at home, particularly impacting its North America Retail and Europe + Australia segments, as consumers stocked up in response to local shelter-in-place restrictions. While the magnitude of increased at-home food demand moderated in April, it remained significantly elevated compared to pre-Covid-19 levels. Notably, General Mills’ Nielsen-measured U.S. retail sales increased 45 percent and 32 percent in March and April, respectively, versus the prior year.
In contrast, the company has seen a substantial decline in away-from-home food demand since the onset of the pandemic. These trends are expected to be a significant headwind on business results in its Convenience Stores + Foodservice segment, driven primarily by the restaurant and education channels, and, to a lesser extent, in its Asia + Latin America segment. Globally, at-home food represents approximately 85 percent of General Mills net sales and away-from-home food represents the remaining 15 percent.
General Mills is partnering closely with its suppliers and customers to ensure its supply chain can meet this elevated at-home food demand. This includes taking actions to increase capacity and maximize product availability, such as optimizing product assortment across targeted platforms.
The company’s strong supply chain execution and its trusted, leading brands have contributed to recent market share gains in its at-home food businesses, including in the North America Retail, Europe + Australia, and Pet segments.
Updated Fiscal 2020 Outlook
General Mills has raised its financial expectations for the fourth quarter of fiscal 2020 to reflect stronger than anticipated at-home food demand in March and April, with an expectation that trends will moderate in May but remain significantly ahead of pre-Covid-19 levels. The company expects fourth-quarter organic net sales to increase double digits versus the prior year, led by strong growth in North America Retail and Pet. Fourth-quarter constant-currency adjusted operating profit is expected to grow faster than organic net sales, reflecting benefits from operating leverage, partially offset by increased costs related to Covid-19. As a result, the company now expects to exceed each of its previous full-year fiscal 2020 guidance ranges of 1 to 2 percent organic net sales growth, 4 to 6 percent growth in constant-currency adjusted operating profit, and 6 to 8 percent growth in constant-currency adjusted diluted earnings per share.
Due to the recent strength in the U.S. Dollar, the company now expects the combination of currency translation, the impact of divestitures executed in fiscal 2019, and contributions from the 53rd week in fiscal 2020 to increase reported net sales by approximately one-half percent, which is below the previous guidance of a net 1 percent increase from these factors. The company’s outlook continues to assume its supply chain will operate with minimal disruption for the remainder of fiscal 2020.
