Cereal maker and packaged food company General Mills (NYSE:GIS) has reported better-than-expected quarterly sales as strong growth in its pet foods business offset a slowdown in demand for its cooking sauces and baking products.
Net revenue at its pet foods unit rose 25% in the first quarter, benefiting from a rise in the adoption of cats and dogs during the pandemic. General Mills has also launched new items such as Tastefuls cat food and bought Tyson Foods' (NYSE:TSN) pet treats business to take advantage of the demand surge.
That helped drive total net sales 4.1% higher to $4.54 billion U.S., beating analysts' estimate of $4.29 billion U.S., according to Refinitiv data.
The latest quarter showed that demand for cereals, snacks and baking products continued to recede from last year's pandemic peak, with the core North America retail business posting a 3% decline.
The Betty Crocker cake mixes maker's gross margins also shrank 1.2%, taking a hit from higher transportation costs, labor shortages and a surge in raw material prices that have impacted the entire packaged foods industry.
The company now expects total input cost inflation for the year to be roughly 7% to 8%, up from a prior estimate of 7%. Quarterly net earnings attributable to General Mills fell 2% to $627 million U.S., or $1.02 per share.
On an adjusted basis, General Mills earned 99 cents U.S. per share, compared with estimates of 89 cents U.S. per share.
General Mills shares were 2% higher in pre-market trading after the results were announced. The company maintained its forecast for annual organic net sales to come in toward the higher end of a 1% to 3% decline range.
