On Thursday, General Mills (NYSE: GIS ) presented analysts and shareholders with its mid-year update. While the performance didn't quite measure up to a 112-foot Stay Puft Marshmallow Man, the food manufacturer did find success with its renewed focus on the Pillsbury Doughboy and chocolate-chip optimization strategies.
The presentation began with a recap of how the company plans to return value to its shareholders. CEO Steven Sanger reviewed the company's target of low-single-digit revenue growth. Plans also call for earnings to accelerate, with an increased focus on productivity and cost-savings measures. Share buybacks will also continue to contribute to growth in diluted earnings per share. Add a growing dividend, and management expects to deliver low-double-digit growth in shareholder gains.
So far, the management team is holding to its goals. Sales increased 6% for the first half of the year, helped by a large new product launch (including Fruity Cheerios) and new cereals leveraging the Disney (NYSE: DIS ) brand. And while it's clear that sales have stabilized at the poorly performing Pillsbury division, I'm still trying to figure out the savings impact related to the "manufacturing process re-engineering" of a chocolate-chip cookie. Still, the combination of higher sales and more efficient use of chocolate chips gave management the confidence to raise fiscal 2007 diluted earnings per share from $3.03-$3.09 to $3.09-$3.13.
Besides penny-pinching on chocolate chips, the company is also turning to new channels to drive revenues. While you might not find Toaster Strudels at Whole Foods (Nasdaq: WFMI ) and Wild Oats (Nasdaq: OATS ) , you will find the Cascadian Farm and Muir Glen brands, which are part of General Mills' Small Planet Foods subsidiary. General Mills is also increasing its presence at non-traditional outlets like dollar discounter Dollar General (NYSE: DG ) and drugstore chains like Walgreen (NYSE: WAG ) .
Still, even with the new channel opportunities and increasing profit margins, General Mills' top-line growth is tepid. General Mills is a mature company in a mature and competitive industry. It's hard to get excited about the company's prospects -- unless, that is, you like a conservative and profitable company run by a management team that continues to return value to its shareholders through increasing dividends and share buybacks.
It's a Foolish thought.
For related Foolishness:
- General Mills Grinds Higher
- Three Cheerios for General Mills?
- General Mills: A Bargain in the Grocery Aisle?
Fool contributor Matthew Crews welcomes your feedback -- really! He has bought General Mills for a family member but does not own it directly or have a financial position in any of the companies mentioned. The Motley Fool has a disclosure policy.