Consumers Chow Down on General Mills

General Mills (NYSE: GIS  ) shareholders are feeling a nutritious boost. Fiscal fourth-quarter and full-year 2009 results revealed that the food maker's leading brands, which include Haagen-Dazs, Yoplait, Cheerios, and Progresso, continue to appeal to consumers' sense of taste and value.

Notable increases in full-year operating profit, emerging-market sales, and to a lesser extent, volume, are among the company's earnings highlights. However, much like getting a surprise Lucky Charm mixed in with your milky bowl of Total, the fiscal year included a 53rd week – and as nice as that is for results, it complicates year-over-year comparisons. For the moment, let's pretend that four-leaf clover is really a cornflake.

On a quarterly basis, net sales increased 5% and segment operating profit shot up 29%, with the profit jump mainly due to lower input costs. Excluding divestiture-related losses in the quarter and mark-to-market adjustments in 2008 and 2009, EPS grew 18%, to $0.86.

For the fiscal year, net sales and segment operating profit posted gains of 8% and 10%, respectively. EPS excluding certain items came in at $3.98, up 13% from a comparable $3.52 in the year before.

OK, now for that pesky extra week, which translated into 6% of net sales growth in the quarter. That means, on a comparable basis, that quarterly net sales were actually down 1%. As for earnings, the expanded calendar contributed roughly $0.07 per share.

Moving on to more easily digestible points, the Big G cereal segment was particularly strong, with annual sales growth of 11% and a market-share gain of more than 1%. Volume in the international segment improved by 5%. Consumers in India and China continue to, um, devour General Mills' products: Annual sales were up 37% and 20%, respectively. In China, management sees ample room for additional growth and is working aggressively.

The food-service segment was the one area of weakness, with volume dropping 6% for the year. Given that restaurant traffic was still down through May, this is hardly a surprising performance, and it squares with a similar drag that H.J. Heinz (NYSE: HNZ  ) reported in its food-service business earlier in the year.

To round out the menu of rib-sticking news, General Mills announced that it would top off its dividend with a 9% increase. That's in the range of dividend hikes announced this year by fellow consumer-goods companies Coca-Cola (NYSE: KO  ) , Colgate-Palmolive (NYSE: CL  ) , and Procter & Gamble (NYSE: PG  ) . Yet, in my assessment, the General has less discretionary/trade-down exposure than the first two names, and it certainly does not face the period of expensive brand investment currently challenging P&G.

Shares aren't the bargain they were a couple of months ago, but for long-term investors, investing now and on potential dips should contribute to years of healthy returns.

Related Foolishness:

Coca-Cola is a Motley Fool Inside Value recommendation. H.J. Heinz, Coca-Cola, and Procter & Gamble are Motley Fool Income Investor recommendations. The Fool owns shares of Procter & Gamble. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Mike Pienciak does not own shares of any company mentioned. The Fool has a disclosure policy.


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  • Report this Comment On July 03, 2009, at 10:34 PM, madmilker wrote:

    "Consumers Chow Down on General Mills"...no! tat rabbit got inside tat Trix box...

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