MINNEAPOLIS, Minn. — General Mills reported flat overall earnings for the second quarter of its fiscal 2020 year, kept afloat mainly by its pet segment with a double-digit net sales increase of 16% to $389 million. The company reported its second quarter and six-month earnings on Dec. 18.
Jeff Harmening, chairman and CEO of General Mills, commented on the company’s pet segment performance over the quarter, saying, “I am pleased to say that we had a great second quarter with net sales up 16%. Our Q2 growth was driven by strong growth in the Food, Drug and Mass and e-commerce channels, positive price mix and a benefit from the timing of shipments in advance of holiday merchandising.”
Total pet segment earnings over the six month period totaled $756 million, an increase of 11%, according to the company. Blue Buffalo’s two largest product lines, Life Protection Formula and Wilderness were key drivers of the net sales growth, according to the General Mills.
Operating profit for the company’s pet division also increased to $81 million, up 14%. General Mills attributed this to higher net sales “partially offset by higher media expense,” it wrote in a press release.
The pet segment’s operating profit for the last six months is up a staggering 90.6% to $162 million compared to year-ago profit, which the company attributed to higher net sales as well as $53 million inventory adjustment purchase in fiscal 2019 that set back its operating profit at the time.
General Mills’ pet business remains lowest on the totem pole in terms of sales but, after driving growth consistently over the past year, has proven a profitable venture for the company following its acquisition of Blue Buffalo in April 2018.
One of the company’s defining strategies for its pet segment has been to extend the brand beyond pet specialty and independent retail channels and into the Food, Drug and Mass (FDM) channel. This has been successful for the Blue Buffalo brand in FDM and e-commerce sales, but has cost the company in the pet specialty channel.
“Retail sales for Food, Drug and Mass customers who have carried Blue more than 12 months were up 45% in second quarter,” Harmening said. “As we expected, retail sales in pet specialty continued to decline by double digits. This is an important channel though for Blue and we continue to support the channel through unique programs and innovation.”
The release of Carnivora exclusively into the pet specialty stores in August 2019 was one part of General Mills’ plan to reaffirm its commitment to the channel, along with upcoming pet specialty-exclusive formulas in its Wilderness and Rocky Mountain Recipes lines in 2020.
Online retail sales for Blue Buffalo were up in the first six month of fiscal 2020, Harmening said, as e-commerce continues to be a driving force for the brand and many others in the modern pet product space.
“For the full year, we remain well on track to deliver 8% to 10% like-for-like growth in the pet segment excluding the benefit of the calendar differences in fiscal 2020. We remain confident in the long-term opportunities for Blue Buffalo and we're excited about the growth prospects ahead,” Harmening concluded about the pet segment.
All in all, the company continues to grow its share of the pet food category in the US market with strides in Blue Buffalo’s sales and retail presence. Harmening said General Mills will continue to spend on innovation for its pet segment in 2020 to drive continued growth across all channels.
Total net sales for all General Mills’ segments totaled $4.42 billion, flat with less than 1% growth from year-ago sales, while operating profit increased 48% to $811.2 billion.
For the first six months of fiscal 2020, General Mills earned $1,101.4 million, equal to $1.82 per share, an increase when compared with the first half of fiscal 2019 when the company earned $735.7 million, equal to $1.23 per share.
General Mills closed by reaffirming its 2020 guidance, including organic net sales growth by 1-2%; adjusted operating profit increase of 2-4%; adjusted diluted EPS increase by 3-5%; and free cash flow of at least 95% of adjusted after-tax earnings.
Read details on General Mill’s first quarter fiscal 2020 earnings.
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