General Mills echoes FedEx with a warning about weaker demand

Limited Edition holiday breakfast cereal, Christmas Crunch in holiday shapes, Target store, Queens, New York. (Photo by: Lindsey Nicholson/UCG/Universal Images Group via Getty Images)

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Two big companies weighed in on persistent demand woes this week.

General Mills, which reported earnings Wednesday morning, said tepid demand and pricing pressures are compounding problems for the Dunkaroos and Bisquick maker. That echoed what FedEx said in its report after the bell Tuesday.

FedEx shares fell 12% on Wednesday, on pace for its worst day in 15 months, while General Mills’ stock slipped more than 3%.

And, just like FedEx, General Mills trimmed its full-year sales outlook. With two quarters remaining in the Cheerios producer’s fiscal year, the company now sees revenue down 1% to flat, compared with previous guidance of a 3% to 4% increase.

General Mills is also cutting the high end of its earnings guidance due to the lower demand forecast. It expects “a slower volume recovery in fiscal 2024, reflecting a more cautious consumer economic outlook.”

While General Mills reported its eighth consecutive quarterly earnings beat, revenue came up well short of estimates: $5.14 billion vs. $5.35 billion expected, according to LSEG, formerly known as Refinitiv. It was General Mills’ biggest revenue miss in eight years.

CEO Jeff Harmening said the company saw “a slower-than-expected volume recovery in the second quarter amid a continued challenging consumer landscape.”

Organic sales growth was an eyesore, unexpectedly contracting 2% versus Street estimates of 3.1% positive growth. Every business segment saw disappointing sales, from consumer food to pet food, from domestic to international.

Volumes fell 4% overall – led by a 5% drop in North America retail volumes. Pricing increases continued to decelerate, contributing just 3 percentage points to sales in the latest quarter.

The company has also been boosting promotions.

“We’re seeing consumers continue to display stronger-than-anticipated value-seeking behaviors across our key markets, and this dynamic is delaying volume recovery in our categories,” Harmening said in a call with analysts.