Distress signals went up in Golden Valley on Wednesday morning: People are buying fewer General Mills products. People may continue to buy fewer General Mills products.
CEO Jeff Harmening chalked up the setback to “stronger-than-anticipated value-seeking behaviors” and “a return toward historical price elasticities.”
In other words, consumers are punishing the maker of Chex Mix and Old El Paso for high prices.
Investors are now taking their turn punishing the stock price, which was down 2% in early trading Wednesday morning.
Already General Mills has tried to temper expectations of slower growth ahead as it leaves behind a major pandemic-era boost when people ate almost entirely at home and stocked their pantries full. On Wednesday the company predicted it may not grow sales at all through next summer.
Harmening said they believe heavy advertising and a suite of product innovations — like high-protein Yoplait yogurt and “loaded” cereals — will provide a springboard for better results down the line.
“Our job is to maximize long-term shareholder return, not any particular quarter or, frankly, even any particular year,” he told analysts. “When the consumer is stressed and results are hard to come by, you know, one of the things we’ve seen successful companies like ours do is reinvest for the future.”
The company will also look to trim costs to offset continued — albeit slowing — inflation, much of it due to higher wages up and down supply chains.
“There’s still a little bit more disruption-related costs to get out,” Chief Financial Officer Kofi Bruce said.
For the fiscal quarter that ended in November, General Mills took in a $595 million profit, a 2% decline from last year. Sales fell 2% to $5.1 billion.
Analysts were looking for $1.16 per share — which General Mills beat on an adjusted basis with $1.25 per share — and $5.3 billion in revenue.
Analyst John Oh with research firm Third Bridge wrote Wednesday that General Mills may have gone too far with price increases, and growth will need to primarily come from selling a greater volume of products.
“The road ahead for General Mills and the wider industry will be a challenging one,” Oh wrote. “It’ll likely only be until mid-calendar year 2024 when we start to see a positive outlook on volume growth.”
“Our experts have also indicated that there’s likely no more room to push pricing with continued pushback and increasing pressure from retailers.”
This story will be updated.