Professor Elam

Thursday Sept  18 2014

Profits at GIS dropped 25%.  And the stock dropped over 4% while sales are down 5%.

GIS is buying an organic foods company but its small sales will not make up for the  loss at GIS.

General Mills blamed its marketing and promotions strategy for much of the disappointment, saying it wasn't very effective at boosting sales despite spending more money.

As a result, gross margin narrowed to 33.7% from 36.9% a year ago.

Ken Goldman, an analyst at J.P. Morgan, said that problem is industry wide, in "what seems to be a fairly self-destructive pattern of heavy promotional spending."

General Mills said fewer people purchased its baking and meal-component products, which include Better Crocker cake mix and Hamburger Helper. The company said cereal remains challenged, with industry sales down 4% in the latest quarter, but that its brands are gaining market share. Sales of Cinnamon Toast Crunch, to which it added more cinnamon, rose 7%, and new flavors of Cheerios with added protein are off to a good start.

I highlighted the accounting information. Students are aware that I mention gross profit often in class. This is the gold standard for how well a manufacturing company is performing.  A 3.2% drop measured in billions of dollars is real money. 

And apparently Americantastes are moving away from cold cereal, Frankly I have always been amazed they sell as much as they do, pretty awful stuff in my opinion but…

So what does GIS do? Believe me they will do soemthing. Checkout quarter to quarter results here. I suspect cost cutting is around the corner.