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General Mills (GIS) Gains on Accelerate Strategy & Pet Unit

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General Mills, Inc. (GIS - Free Report) is benefiting from focus on growth initiatives including the Accelerate strategy. The company’s three key priorities are also yielding. Apart from this, General Mills’ solid Pet segment sales are a driver.

Let’s delve deeper.

Growth Initiatives on Track

General Mills is focused on the Accelerate strategy (unveiled in February 2021), which helps the company to make choices regarding how to win and where to play with an aim to boost profitability and enhance shareholders’ returns in the long run. Under how to win, General Mills is focused on four pillars that are designed to provide 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 as well as product prioritization along with portfolio restructuring. This includes prioritizing investment, investing in five Global Platforms, driving growth in Local Gem brands and reshaping portfolio. With regard to reshaping portfolio, the company concluded the acquisition of Tyson Foods’ (TSN - Free Report) pet treats business on Jul 6, 2021. In March, the company entered into a memorandum of understanding to offload 51% controlling interest in Yoplait S.A.S. The transaction is likely to conclude by the end of 2021.

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General Mills is on track with its three key priorities for fiscal 2022, which are in line with the Accelerate strategy. The company plans to continue competing effectively, with measures like prioritizing core markets; local gem brands and global platforms along with utilizing its innovation and brand-building capacities. It is focused on undertaking cost control moves including Holistic Margin Management (HMM) productivity program, Strategic Revenue Management (SRM) pricing initiatives among other endeavors to counter input cost inflation and other cost woes. Thirdly, it is focused on actions related to reshaping the portfolio and the organization.

Pet Segment – a Driver

General Mills acquired Blue Buffalo Pet Products, Inc. in fiscal 2018, which is part of the company’s Pet segment. Blue Buffalo manufactures and markets wholesome natural pet food items and is contributing to General Mills’ top line. The Blue Buffalo brand continued to drive solid retail sales growth and market share gains across measured channels during the first quarter of fiscal 2022. The Tyson Foods’ pet treats business acquisition also adds another leaf to the company’s impressive Pet platform.

During the fiscal first quarter, net sales in the Pet segment came in at $488 million, up 25% year over year on the back of solid volume growth as well as positive net price realization and mix. Net sales growth included 5 points of gains from the recently-acquired Tyson Foods’ pet treats business. Organic sales increased 20%, while operating profit rose28% on the back of positive price mix and improved volume. The recently-acquired pet treats business is expected to contribute nearly 2 cents to the bottom line in fiscal 2022. Management highlighted that higher pet population as well as more humanization and premiumization of pet food amid the pandemic are a tailwind for the company’s pet food category.

All said, we believe that strength in the Pet segment along with the aforementioned upsides is likely to help the Zacks Rank #2 (Buy) company sustain growth. Shares of the company have gained 2.7% in the past three months against the industry’s 2.6% decline.

Other Solid Food Picks

United Natural Foods, Inc. (UNFI - Free Report) , currently sporting a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 13.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Kraft Heinz Company (KHC - Free Report) , currently carrying a Zacks Rank of 2, has a trailing four-quarter earnings surprise of 11.5%, on average.