Magical unicorns are helping General Mills sell more cereal but not enough to satisfy the appetite of investors.
Despite posting a better-than-expected profit for its fiscal first quarter on Tuesday, General Mills investors hoped for stronger sales growth in both its largest business segment, selling food through U.S. stores, and its newest, the recently purchased Blue Buffalo pet food brand.
Sales of Blue Buffalo products grew 9 percent, falling below executives' full-year forecast of double-digit percentage growth. Investors, concerned General Mills overpaid for Blue Buffalo, are eager to see the acquisition pay off. Jeff Harmening, General Mills' chief executive, said the business has a long runway ahead of it.
"We still only have 3 percent household penetration among pet parents," Harmening said. "So, we have a lot of room to expand."
Better known for making and selling human food, the Golden Valley-based company saw improvements across its international businesses and in U.S. cereal sales. But declines in other U.S. food categories, from yogurt to snack bars, led it to slightly miss analysts' forecasts for sales growth.
The company's U.S. retail business reported a 2 percent sales decline. Cereal sales in that unit were up 1 percent. Executives said the new unicorn marshmallow in Lucky Charms and the return of artificial colors and flavors to Trix lifted demand for those cereals.
But investors are looking for signs that the company's renewed focus on, and investment in, growing sales is paying off, said Brittany Weissman, a food-industry analyst with Edward Jones.
General Mills reported sales of $4.09 billion, a 9 percent increase over the same period last year largely due to the inclusion of Blue Buffalo. Analysts expected sales of $4.11 billion. Organic net sales, which don't include the effect of acquisitions, rose by less than a half percent.