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Accelerate Strategy Aids General Mills (GIS), High Costs Hurt
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Focus on growth initiatives like the Accelerate strategy and key priorities is working favorably for General Mills, Inc. (GIS - Free Report) . The company’s solid Pet segment sales are a key driver. However, the branded consumer food company has been battling cost headwinds for a while now.
Let’s discuss this in detail.
Accelerate Strategy on Track
General Mills is focused on its Accelerate strategy (unveiled in February 2021), which aids it in making choices of how to win and where to play to boost profitability while enhancing shareholder returns in the long run. Under how to win, General Mills is focused on four pillars that are designed to provide a competitive advantage. These include brand building, undertaking innovations, unleashing scale and maintaining business strength.
Where to play principle is outlined to enhance the company’s capabilities to generate profitability through geographic and product prioritization along with portfolio restructuring. This includes prioritizing investment, investing in five Global Platforms, driving growth in Local Gem brands and reshaping the portfolio.
For fiscal 2024, General Mills remains committed to the Accelerate strategy, underscored by its three priorities — competing efficiently through brand building and innovation, enhancing the supply chain by boosting Holistic Margin Management (“HMM”) cost savings and curtailing costs and undertaking efficient capital allocation, rewarding shareholders and staying committed to reshaping the portfolio. Management expects HMM cost savings of 4% of the cost of goods sold in fiscal 2024.
Image Source: Zacks Investment Research
Pet Business Aids
The Zacks Rank #3 (Hold) company is one of the leading players in the pet food arena. In the fourth quarter of fiscal 2023, Pet segment revenues came in at $655 million, which ascended 7% year over year due to the positive net price realization and mix. Segment net sales benefited from strong dry pet food and pet treats growth. A higher pet population and more humanization and premiumization of pet food have been acting as tailwinds for the company’s pet food category.
In fiscal 2024, management expects operating profit growth in the Pet segment to be higher than organic net sales growth, driven by enhanced volumes, reduced supply-chain costs and gains from the company’s SRM initiative.
Addressing The Hurdles
In the fourth quarter of fiscal 2023, though the company’s adjusted gross margin increased year over year, it was partly hurt by elevated input costs, with input cost inflation being 9% in the quarter. The company also witnessed a rise in adjusted SG&A expenses, which included a double-digit spike in media investments.
On its fourth-quarter earnings call, management stated that the most significant factors impacting its show in fiscal 2024 are likely to be consumers’ economic status, cost inflation and the rising stability of supply-chain status. For fiscal 2024, management expects input cost inflation of 5% of the total cost of goods sold, stemming from labor inflation. This factor continues to impact the costs of sourcing, manufacturing and logistics.
Management also highlighted that as it steps into a potentially more challenging scenario, it is important for the company to elevate brand-related investments. We believe that these might come at the cost of margins.
All said, let’s see if the abovementioned upsides can help the company stay afloat amid such hurdles. GIS’s stock has declined 19.4% in the past three months compared with the industry’s 7.5% decline.
Some Better-Ranked Staple Bets
Here, we have highlighted three better-ranked stocks, namely Post Holdings (POST - Free Report) , Utz Brands Inc. (UTZ - Free Report) and The J. M. Smucker Company (SJM - Free Report) .
Post Holdings, a consumer-packaged goods holding company, currently sports a Zacks Rank #1 (Strong Buy). POST has a trailing four-quarter earnings surprise of 59.6% on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Post Holdings’ current fiscal year sales and earnings suggests growth of 13.5% and 184.5%, respectively, from the corresponding year-ago reported figures.
Utz Brands manufactures a diverse portfolio of salty snacks and has a Zacks Rank #2 (Buy). UTZ’s expected EPS growth rate for three to five years is 11.4%.
The Zacks Consensus Estimate for Utz Brands’ current fiscal year sales suggests growth of 3.7% from the year-ago reported numbers. UTZ has a trailing four-quarter earnings surprise of 12.3% on average.
The J. M. Smucker, which manufactures and markets branded food and beverage products, currently carries a Zacks Rank of 2. SJM has a trailing four-quarter earnings surprise of 14% on average.
The Zacks Consensus Estimate for The J. M. Smucker’s current financial-year earnings suggests growth of 6.8% from the year-ago reported figure.
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Accelerate Strategy Aids General Mills (GIS), High Costs Hurt
Focus on growth initiatives like the Accelerate strategy and key priorities is working favorably for General Mills, Inc. (GIS - Free Report) . The company’s solid Pet segment sales are a key driver. However, the branded consumer food company has been battling cost headwinds for a while now.
Let’s discuss this in detail.
Accelerate Strategy on Track
General Mills is focused on its Accelerate strategy (unveiled in February 2021), which aids it in making choices of how to win and where to play to boost profitability while enhancing shareholder returns in the long run. Under how to win, General Mills is focused on four pillars that are designed to provide a competitive advantage. These include brand building, undertaking innovations, unleashing scale and maintaining business strength.
Where to play principle is outlined to enhance the company’s capabilities to generate profitability through geographic and product prioritization along with portfolio restructuring. This includes prioritizing investment, investing in five Global Platforms, driving growth in Local Gem brands and reshaping the portfolio.
For fiscal 2024, General Mills remains committed to the Accelerate strategy, underscored by its three priorities — competing efficiently through brand building and innovation, enhancing the supply chain by boosting Holistic Margin Management (“HMM”) cost savings and curtailing costs and undertaking efficient capital allocation, rewarding shareholders and staying committed to reshaping the portfolio. Management expects HMM cost savings of 4% of the cost of goods sold in fiscal 2024.
Image Source: Zacks Investment Research
Pet Business Aids
The Zacks Rank #3 (Hold) company is one of the leading players in the pet food arena. In the fourth quarter of fiscal 2023, Pet segment revenues came in at $655 million, which ascended 7% year over year due to the positive net price realization and mix. Segment net sales benefited from strong dry pet food and pet treats growth. A higher pet population and more humanization and premiumization of pet food have been acting as tailwinds for the company’s pet food category.
In fiscal 2024, management expects operating profit growth in the Pet segment to be higher than organic net sales growth, driven by enhanced volumes, reduced supply-chain costs and gains from the company’s SRM initiative.
Addressing The Hurdles
In the fourth quarter of fiscal 2023, though the company’s adjusted gross margin increased year over year, it was partly hurt by elevated input costs, with input cost inflation being 9% in the quarter. The company also witnessed a rise in adjusted SG&A expenses, which included a double-digit spike in media investments.
On its fourth-quarter earnings call, management stated that the most significant factors impacting its show in fiscal 2024 are likely to be consumers’ economic status, cost inflation and the rising stability of supply-chain status. For fiscal 2024, management expects input cost inflation of 5% of the total cost of goods sold, stemming from labor inflation. This factor continues to impact the costs of sourcing, manufacturing and logistics.
Management also highlighted that as it steps into a potentially more challenging scenario, it is important for the company to elevate brand-related investments. We believe that these might come at the cost of margins.
All said, let’s see if the abovementioned upsides can help the company stay afloat amid such hurdles. GIS’s stock has declined 19.4% in the past three months compared with the industry’s 7.5% decline.
Some Better-Ranked Staple Bets
Here, we have highlighted three better-ranked stocks, namely Post Holdings (POST - Free Report) , Utz Brands Inc. (UTZ - Free Report) and The J. M. Smucker Company (SJM - Free Report) .
Post Holdings, a consumer-packaged goods holding company, currently sports a Zacks Rank #1 (Strong Buy). POST has a trailing four-quarter earnings surprise of 59.6% on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Post Holdings’ current fiscal year sales and earnings suggests growth of 13.5% and 184.5%, respectively, from the corresponding year-ago reported figures.
Utz Brands manufactures a diverse portfolio of salty snacks and has a Zacks Rank #2 (Buy). UTZ’s expected EPS growth rate for three to five years is 11.4%.
The Zacks Consensus Estimate for Utz Brands’ current fiscal year sales suggests growth of 3.7% from the year-ago reported numbers. UTZ has a trailing four-quarter earnings surprise of 12.3% on average.
The J. M. Smucker, which manufactures and markets branded food and beverage products, currently carries a Zacks Rank of 2. SJM has a trailing four-quarter earnings surprise of 14% on average.
The Zacks Consensus Estimate for The J. M. Smucker’s current financial-year earnings suggests growth of 6.8% from the year-ago reported figure.