General Mills drops the most since March after reporting falling demand, lower margins

  • Cheerios cereal maker General Mills missed analysts' estimates for quarterly sales.
  • Results were hit by lower demand for its snacks and yogurts in the U.S.
  • General Mills, like its rivals, is battling rising freight costs as railroads and truck fleets hike rates, as well as higher input costs.
General Mills cereal products in Miami, Florida.
Getty Images
General Mills cereal products in Miami, Florida.

Cheerios cereal maker General Mills missed analysts' estimates for quarterly sales on Tuesday, hit by lower demand for its snacks and yogurts in the United States.

Shares of the Minneapolis-based company dropped more than 7 percent for their worst performance since March 2018.

General Mills, like its rivals, is battling rising freight costs as railroads and truck fleets hike rates, as well as higher input costs.

This hurt the company's adjusted gross margins, which fell 160 basis points to 33.6 percent in the reported quarter.

The company, which also owns Haagen-Dazs and Betty Crocker brands, said sales in its U.S snacks unit fell 4 percent, while yogurt sales declined 2 percent.

The company's net sales rose nearly 9 percent to $4.09 billion, boosted by its acquisition of pet food company Blue Buffalo, but missed analysts' estimates of $4.12 billion, according to Thomson Reuters I/B/E/S.

Net income attributable to the company fell to $392.3 million, or 65 cents per share, in the first-quarter ended Aug. 26, from $404.7 million, or 69 cents, a year earlier.

Excluding items, the company earned 71 cents per share.