General Mills Cutting Jobs as Dollar Drags on Sales

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General Mills Inc. (NYSE: GIS) reported third-quarter fiscal 2015 results before markets opened Wednesday. The food processing and packaged foods maker reported quarterly adjusted diluted earnings per share (EPS) of $0.70 on revenues of $4.35 billion. In the same period a year ago, General Mills reported EPS of $0.62 on revenue of $4.38 billion. Third-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.67 and $4.35 billion in revenue.

The company said during the second quarter it planned to eliminate about 800 U.S. jobs in fiscal year 2015, including 400 in its Indiana distribution facility. Another 250 supply chain jobs will be eliminated by the end of 2018 at a distribution facility in Massachusetts, and by the end of fiscal year 2016 the company will close a plant in California that now employs about 430 people. In the first quarter, the company announced a plan to eliminate 240 jobs in its international segment.

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The company estimates that foreign currency effects cost it 1% in net sales. On a constant currency basis, net sales rose 3% year-over-year. U.S. sales rose 1% while international sales fell by 7%. On a constant currency basis, international sales rose 6%.

In its outlook, General Mills said it expects net sales on a constant currency basis to grow at a low single-digit rate from the 2014 base of $17.9 billion, including 2% growth due to an extra week and incremental sales from a recent acquisition. Operating profit in constant currency is expected to decline at a low single-digit rate from last year’s total of $3.15 billion. Adjusted diluted EPS are expected to rise by a low single-digit rate from last year’s total of $2.82. At current rates, the company estimates a $0.07 per share reduction due to foreign exchange rates.

Consensus estimates for the fourth quarter call for EPS of $0.74 on revenues of $4.58 billion. For the full year analysts are looking for EPS of $2.82 on revenues of $17.87 billion. In order to meet the EPS expectations while factoring in the currency exchange impact, General Mills will need to boost EPS by about 3%. That could be tricky.

The company’s CEO said:

Our operating results are beginning to show the positive effects of our companywide focus on putting the Consumer First. Where we have made improvements to established brands, launched new items, and developed marketing messages that respond to consumers’ evolving preferences, we are seeing growth in our businesses. We’re developing plans for fiscal 2016 designed to build on this momentum and expand the impact of our Consumer First strategic focus.

Shares were up about 2% in premarket trading Wednesday, at $53.00 in a 52-week range of $48.32 to $55.64. Thomson Reuters had a consensus analyst price target of around $52.70 before the results were announced.

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