General Mills' earnings for its current fiscal year won't be as good as the company expected.
The maker of foods such as Progresso soup, Hamburger Helper and Yoplait yogurt, is reducing its full-year earnings forecast by about two percent.
Edward Jones analyst Jack Russo said consumers are resisting the attempts of General Mills and other food companies to pass long rising commodity costs. And that's hurting sales and profits.
"A lot of companies have raised prices on their products to offset higher commodity costs," he said. "And it appears that consumers are voting with their feet and have just said, 'Look, we can't afford some of these higher prices' and have cut back on purchases, perhaps looking at [grocery stores'] private label [offerings] a little bit. Or perhaps just cutting back period on what they're spending."
Bloomberg Research consumer products analyst Ken Shea said it's hard to fight consumers' frugality.
"Consumer spending is tight," he said. "And consumers are looking for bargains. So, it's just a tough environment for food manufacturers in general to generate sales and profitable growth."
The federal government said grocery store prices rose by nearly five percent last year and may rise by about three percent this year.
Target says it will buy back up to another $5 billion of its shares under a new stock repurchase program. The stock buyback is expected to be completed in the next two to three years.
The retailer's current $10 billion program is expected to be completed within the next few months.
Share buybacks help a company boost its own share price. By purchasing its own shares, a company reduces the supply of its stock and adds new demand for the shares in the marketplace.
Target also announced it will introduce small Apple shops inside 25 stores.
Target shares rose 1.6 percent Thursday to close at $49.81. Its highest price in the past 52 weeks was $56.44.
Cargill today reported earnings plunged even as revenue jumped in the three months ending Nov. 30th.
Net income from continuing operations dropped 88 percent to $100 million.
Revenue was $33.3 billion, up 17 percent from a year ago.
"The second quarter was significantly below expectations," said CEO Greg Page in a statement.
He cited several factors:
• Commodity and financial markets were driven more by political uncertainties than by underlying supply and demand fundamentals.
• Performance in the sugar market was poor.
• The meat businesses experienced one of their weakest quarters.
• A significant number of one-time items, including asset impairments, and acquisition and integration expenses.
Cargill announced last month it will lay off up to 2,000 employees globally over the subsequent six months.
At the time, the company's workforce totaled 138,000 employees, with the layoffs affecting about 1.5 percent of them.
Page said Cargill is actively working both to reduce costs and simplify the agribusiness giant's work processes.
Page said the fundamentals of Cargill's business remain sound, and he's optimistic about the company's earnings prospects for the remainder of the fiscal year.
By Martin Moylan
Target lowered its earnings expectations Thursday after disclosing disappointing December sales.
Sales at stores open at least a year rose just 1 percent, falling short of the company's expectations. Revenue at stores open at least a year is a key measure of a retailer's financial health because it excludes stores that open or close during the year.
Sales of consumer electronics, music, movies and books were soft. But Target said grocery and health and beauty sales were strong.
Morningstar retail analyst Michael Keara says Target's performance reflects intense price competition.
"Wal-Mart definitely undercut them on price," Keara said. "Wal-Mart was very aggressive on pricing during the holiday season. In fact, all retailers were. That bodes well for consumers, obviously. But in terms of the perspective from companies, it's clear that whoever wants to get sales is going to have to give up some margin."
In October, Wal-Mart announced plans to cut prices by a cumulative $2 billion over two years.
"I don't know if they reacted quickly enough in terms of cutting prices. We'll see that later when they report fourth quarter earnings," Keara said.
Target is seeing pressure on its profit margin. For the three months ending this month, Target expects earnings could be as much as 9 percent under Wall Street's expectations. Target's shares are down about 4 percent today.
General Mills' Big G cereals division, no slouch at marketing, may have gotten a marketing windfall from music's Big G, Lady Gaga. But then again, maybe not.
Gaga's latest video, "Marry the Night," has a scene showing the pop sensation mostly naked and pouring what appears to be a box of Cheerios into her mouth.
As of Tuesday afternoon, YouTube reported the video had been viewed 10,918,294 times. It debuted only last Friday.
A rep for Cheerios tells us, the cereal company had nothing to do with the video -- but it also has no plans to pursue legal action.
The rep tells us, "We feel that people express their passion in a lot of different ways ... This was certainly a first!"
Maybe Gaga was inspired by General Mills tapping unrepentant potheads to promote brownies.
The real Betty Crocker question is this: How appetizing is it to see Cheerios stuck on sweaty skin?
Catch the 14-minute Gaga video here. View at work at your own risk.