Will Pet Segment Drive General Mills (GIS) In Q2 Earnings?
Zacks Investment Research | Dec 16, 2019 06:21AM ET
General Mills, Inc. (NYSE:GIS) is set to report second-quarter fiscal 2020 results, which are likely to have gained from the Pet segment, on Dec 18. Markedly, the Pet segment constituted more than 9% of General Mills’ top line in the first quarter of fiscal 2020 and offered some cushion to the otherwise soft sales. Well, General Mills has been seeing sluggishness at its North America Retail segment, due to challenges in the U.S. Snacks category. Also, sales at its Europe & Australia segment have been soft.
Let’s take a closer look at these aspects and other overall trends that are likely to have impacted General Mills’ results in the quarter under review.
Pet Segment Looks Promising
General Mills became one of the leading players in the pet food arena after it acquired Blue Buffalo Pet Products, Inc. in fiscal 2018. Blue Buffalo, which forms the company’s Pet segment, manufactures and markets wholesome natural pet food items. Notably, it has been significantly contributing to General Mills’ performance.
In fact, during the first quarter of fiscal 2020, revenues at the Pet segment came in at $368 million in the quarter, up 7% year over year on the back of volume growth, favorable net price realization and mix impacts. Further, expansion in the Food, Drug and Mass (FDM) network has been a key driver. Management earlier stated that it anticipates significant sales and segment operating profit growth at Blue Buffalo in fiscal 2020. This clearly gives out positive signals for the quarter to be reported.
The Zacks Consensus Estimate for revenues in the Pet segment is currently pegged at $378 million compared with $335 million reported in the year-ago period. The consensus mark for segment operating profit stands at $81 million, up from $71 million reported in the second quarter of fiscal 2019.
What’s in Store for North America Retail Segment?
The North America Retail segment formed more than half of the company’s sales in the last reported quarter. However, it continued to witness challenges in U.S. Snacks and Canada. U.S. Meals & Baking sales were also soft. Consequently, the company’s North America Retail sales dipped 0.5% during the first quarter of fiscal 2019. Nonetheless, the company has been making efforts to boost performance in the snacks category. The Zacks Consensus Estimate for revenues in the North America Retail segment is currently pegged at $2,688 million compared with $2,677 million reported in the year-ago period.
Apart from this, sales in General Mills’ Europe & Australia segment have been declining for the last few quarters due to a tough operating environment in France and weak trends in ice cream, among other factors. The Zacks Consensus Estimate for revenues in the Europe & Australia segment is currently pegged at $435 million, suggesting a decline from $454 million reported in the year-ago period.
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