General Mills pet food sales level, profit up Q2 FY2023

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Adapted from a press release:

Pet food and treat sales declined slightly for General Mills in the second quarter of fiscal year 2023, although operating profits increased 34%, compared to the same period in the previous fiscal year. General Mills pet segment sales were US$592.9 million in Q2 FY23, compared with US$593.4 million during the same period of the previous fiscal year. However, General Mills’ pet food sales increased by 8% when considering the six months ending Nov. 27, 2022.

In 2021, General Mills purchased Tyson Foods pet treats business for approximately US$1.2 billion. In 2018, General Mills acquired premium pet food company, Blue Buffalo. General Mills pet segment’s annual revenue reached US$1,732,000 in 2021, according to Petfood Industry’s Top Companies Current Data.

General Mills’ pet segment performance

“Organic net sales were flat. Net sales performance was negatively impacted by a reduction in retailer inventory, with all-channel retail sales up high single digits in the quarter,” General Mills representatives said on Dec. 20 in a press release. “Excluding the retailer inventory change, net sales results were broadly in line with company expectations and reflected continued strength of the Blue Buffalo brand, partially offset by a short-term headwind from capacity constraints and related customer service challenges. Pet net sales performance is expected to accelerate in the second half of fiscal 2023 due to increased capacity, improved customer service, increased brand-building investment, and an expectation for stable retailer inventory levels.

“Segment operating profit totaled US$87 million compared to US$132 million a year ago, driven primarily by high-teens input cost inflation, a significant increase in costs related to capacity expansion and supply chain disruptions, and lower volume, including the impact of the retailer inventory reduction. These headwinds were partially offset by favorable net price realization and mix.

“Through six months, Pet segment net sales increased 8 percent to $1.2 billion, including a 2-point benefit from the pet treats acquisition. Organic net sales were up 6 percent. Segment operating profit was down 15 percent to $210 million, driven primarily by higher input costs, lower volume, and higher SG&A expenses, partially offset by favorable net price realization and mix.

“During the first quarter of fiscal 2022, we acquired the pet treats business for US$1.2 billion in cash. We financed the transaction with a combination of cash on hand and short-term debt. We consolidated the pet treats business into our consolidated balance sheets and recorded goodwill of US$762 million, indefinite-lived intangible assets for the Nudges, Top Chews, and True Chews brands totaling US$330 million in aggregate, and a finite-lived customer relationship asset of US$40 million. The goodwill is included in the Pet segment and is deductible for tax purposes. The pro forma effects of this acquisition were not material.

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