General Mills forecasts annual profit below estimates citing cost pressures

(Reuters) -Cheerios cereal maker General Mills (NYSE:) forecast annual profit below estimates on Wednesday and posted a bigger-than-expected drop in quarterly sales hurt by lower demand for its snack bars and pet food, as well as higher input costs.

The company also expects annual dollar value growth in its businesses to be below its long-term projections, pushing its shares down by about 4% before the bell.

The Minneapolis, Minnesota-based company has struggled with lower volumes and retailers cutting down on inventory, while facing ongoing competition from lower-priced private labels that have been eating into its market share.

Net sales at General Mills’ North America retail segment, the company’s biggest revenue contributor, fell 7% in the quarter ended May 26 due to a 6 percentage point drop in volumes. Overall, its volumes fell about 2 percentage points in the quarter.

Peers WK Kellogg (NYSE:) and Kraft Heinz (NASDAQ:) have also reported pressured volumes, while competitor Campbell Soup (NYSE:) reported an upbeat quarter and raised its forecast owing to demand recovery and improvement in volumes.

The company has also been pressured by higher input costs, such as sugar and labor, as well as supply chain disruptions.

General Mills expects full-year adjusted profit to be between down 1% and up 1%, compared with analysts’ estimates of a 3.7% rise, according to LSEG data.

The company also noted that it continues to feel the impact of the uncertain macroeconomic environment affecting consumers in its core markets.

The company’s quarterly net sales fell to $4.71 billion from $5.03 billion a year ago. Analysts, on average, had expected sales of $4.85 billion, according to LSEG data.

On an adjusted basis, the company earned $1.01 per share, edging past estimates of 99 cents.