General Mills Inc. on Friday sharply lowered its sales and profit outlook citing “continued weak” industry trends, another sign of the growing challenge it faces from Americans’ changing eating habits.
Golden Valley-based General Mills, like other big makers of processed foods, has been contending with slowing consumption of carbohydrates and packaged foods as more people shift their diets toward proteins and fresh foods. Euromonitor, a market research firm, forecasts that packaged-food sales in North America will grow only 1 percent a year over the next five years.
General Mills has been changing its product portfolio in response, growing its natural food lines through purchases like organic-food maker Annie’s Inc. in October, and adding protein to existing products like Cheerios.
It has also cut prices. In its statement Friday, General Mills said 75 percent of its U.S. products have seen market share gains so far this year, but that its market share measured by store dollars had fallen slightly. The biggest declines in recent weeks have been in frozen vegetables and dessert mixes, the company said.
Its new outlook statement told investors to expect a decline in profit for its current quarter, the second of its fiscal year and still two weeks from finishing on Nov. 23.
Before Friday’s warning, analysts forecast that General Mills’ profit for the quarter would rise about 6 percent to 88 cents a share from 83 cents a share a year ago. Instead, the company said it now expects to earn 75 cents to 77 cents a share.
The revised outlook, issued before the market opened, sent General Mills shares down 3.6 percent Friday.
The expected profit decline follows one in the June-to-August period, a quarter that yielded the company its smallest profit since the spring of 2012. It will be the first back-to-back decline in quarterly profits at General Mills since 2011.
“It’s not surprising the company cut its profit forecast, given its weak first quarter and its original ‘aspirational’ profit guidance,” Goldman Sachs analyst Jason English wrote in a research note Friday.
“The demand backdrop in U.S. center-store categories is just too challenging, in our view, and there is little end in sight,” he added. The term “center-store” refers to the area of a supermarket where processed foods are typically shelved.
In October, the company announced it would eliminate up to 800 of its 43,000 jobs as a cost-saving measure.
Also in Friday’s outlook revision, General Mills said it expects full-year sales to grow at a low single-digit rate, including the recent addition of the Annie’s organic food business it bought in October.
The company had been targeting mid-single-digit growth in sales and operating profit for the quarter. For the full fiscal year, it had been aiming for high single-digit growth over last year’s profit of $1.8 billion.
The announcement marked a swift change in tone for General Mills. Its executives reiterated their full-year outlook just six weeks ago, during the release of results for the fiscal first quarter. In that period, General Mills’ adjusted earnings amounted to 61 cents a share, down from 70 cents a year ago.
Staff writer Mike Hughlett contributed to this report.