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.
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