By Bill Peters

'Cat growth is on fire,' one executive says

General Mills' stock jumped on Wednesday but is still down for the year.

After making its products cheaper last year, General Mills is now trying to make them better as it seeks to win over increasingly price-conscious consumers and reverse a monthslong stock drop.

During its fiscal fourth-quarter earnings call on Wednesday, the packaged-food giant (GIS) - known for grocery brands like Cheerios and Annie's and pet foods like Tiki Cat and Blue Buffalo - said it would lean harder into "innovation" within its high-end products this fiscal year, following the success of items like higher-protein Cheerios and bolder-flavor Chex Mix.

"We know that consumers are still willing to pay for benefits that matter most to them," Chief Operating Officer Dana McNabb said on Wednesday's call. "Think functional nutrition, bold flavors, et cetera."

Still, she said that consumers would likely feel pressured in the months ahead, meaning they might wait for further price cuts and make tradeoffs on things like package sizes. That cautious spending backdrop follows several years of cost-of-living increases, made more pronounced by the Iran war and even the artificial-intelligence race.

The focus on newer products follows General Mills' efforts to lower prices or otherwise align them better with demand amid tougher competition from smaller brands and retailers' own private-label products. Earlier this year, PepsiCo (PEP) cut prices on snacks like Doritos and Cheetos following complaints from consumers. It and its rivals have tried to sell more snacks and drinks featuring protein and fiber, among other things, in an effort to keep pace with wellness trends and stay relevant with consumers.

General Mills executives made the remarks after the company's fourth-quarter results topped Wall Street's expectations, and after executives said they were targeting $3 billion in cost savings by fiscal 2030. Shares jumped 8.5% on Wednesday.

Still, the stock is down 18.8% so far this year, and it has fallen even more sharply from highs reached in 2023. Shares are trading at around $37, rebounding slightly from last month, when the stock reached lows not seen since 2009. TD Cowen analyst Robert Moskow, in a note last week, said the company's retail sales had weakened despite its efforts to keep prices lower.

"We see risk of weak trends continuing as consumers continue to face pressures from SNAP cutbacks, slowly rising food prices and higher gas prices," he said then, referring to the federal food-assistance program.

General Mills on Wednesday reported adjusted earnings of 95 cents a share on revenue that was up 1% to $4.61 billion. Both results were above Wall Street's estimates.

However, the company forecast fiscal 2027 adjusted earnings per share of between $3 and $3.20, with the midpoint of that range below FactSet forecasts for $3.13. The company said it expects organic net sales to be anywhere from down 1.5% to up 0.5%.

General Mills' fiscal year runs through May. Organic sales are sales that are adjusted for foreign exchange and things like acquisitions and divestitures.

The company said some $2 billion of its $3 billion savings target would likely come from ongoing efforts to manage margins. The other $1 billion, it said, would likely come from efforts to recalibrate its supply chain and other moves to streamline the business. Executives said the company needed to adjust its production and distribution network to churn out new products more quickly and offer more flexibility on packaging.

Moskow, in a note on Wednesday, said "questions will remain about the future given guidance for another year of organic growth declines and another $1 [billion] restructuring announcement to align with weaker volume." Volume is a measure of the amount of product sold.

Still, executives expressed optimism during the earnings call about things like Totino's pizza crusts and seasoned pizza rolls, as well as Asian- and Mexican-inspired snacks.

They also called out gains in pet food, where sales in North America rose 4% in the fourth quarter. Executives said products like Tastefuls snacks and high-protein Tiki Cat food could still drive growth despite a shaky consumer backdrop.

"Cat growth is on fire," McNabb said.

-Bill Peters

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