General Mills Q1 Was As Challenging As Expected

Given the challenging fiscal Q1:17 for General Mills, Inc. GIS, Barclays’ Andrew Lazar expressed surprise regarding the company’s Strategic Revenue Model (SRM) program.

Lazar maintained an Equal Weight rating on the stock, with a price target of $66.

The SRM Program

The analyst mentioned that the SRM program was expected to “improve organic sales performance across the U.S. Retail portfolio via price/mix, as GIS pulls on levers including price pack architecture, mix management, and trade promotion management.”

Lazar explained that this meant that given the more pressured volume environment, higher contribution from price and mix could help drive revenue and lead to a robust associated margin impact.

The analyst noted that these actions from General Mills closely follows its cereal competitor, Kellogg Company K bringing back its volume to value “wheel."

Challenging Environment

“On the one hand, in light of the challenging volume environment, we see a more intent focus on price/mix to drive top line and margin as a prudent course of action to take, and would note that when both GIS and K intend to follow a similar strategy, perhaps it does have a better chance of taking hold,” Lazar stated.

However, while the 5 percent year-on-year decline in General Mills’ organic sales in its core U.S. Retail segment might not have come as a surprise to investors, the analyst believes that it does limit the visibility into the full year organic sales range.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!