General Mills Stock Gets a Boost, Thanks to Rising Pet Sales

Sales of the company’s Blue Buffalo pet food made up for falling snack and yogurt sales.

General Mills reported its second-quarter earnings this week, and the results were better than investors had expected. The company has struggled with falling sales for the past couple of years, but these latest results suggest it could be returning to growth.

The company’s sales and earnings are up from a year earlier. This increase is mostly thanks to General Mills’ pet brand, Blue Buffalo, as we’ll discuss in more detail below. Here is an overview of how the company fared during the second quarter:

  • Earnings: 95 cents per share, as opposed to 88 cents per share forecasted
  • Revenue: $4.4 billion, which was in line with Wall Street’s expectations

What General Mills did well during Q2

For the past couple of years, General Mills has struggled with falling snack and yogurt sales. This trend continued during the second quarter, with snack sales in the U.S. falling 2% and yogurt sales falling 4%. 

However, these losses were offset by significant gains in the company’s pet food division. General Mills purchased the pet food brand Blue Buffalo in 2018, and this decision seems to have paid off for the company. 

Pet food sales rose 16% and were highest for the company’s Life Protection Formula and Wilderness lines. Sales of the company’s cereals and frozen baked goods remained mostly flat from a year earlier. 

General Mills’ international sales continue to decline, but the rate of decline is slowing. Overall, company management expects the positive results to continue into the second half of fiscal 2020. 

What’s next for General Mills?

The company still has more progress to make in terms of growth, but these second-quarter earnings are a positive turn of events for General Mills. According to CEO Jeff Harmening, the company plans to focus on marketing and product innovation in 2020.
General Mills faces much stiffer competition in terms of snack foods and cereals, so diversifying into the pet food business was a smart move. Overall, the company’s shares are up 36% from a year earlier, and the stock is considered a moderate buy on Wall Street.