General Mills said it was ready to take on surging costs as inflation-hit Americans eat more at home to save money, and that it attributed its estimate-beating quarterly results to higher pricing.
The Cheerios maker sent its quarterly dividend up 5.5% on Wednesday, as demand for its breakfast cereals, snack bars and pet food held steady despite price hikes.
As consumers become more concerned about the economic reality, the first thing they tend to do is to eat more at home, Chief Executive Officer Jeff Harmening said.
People have cooked more at home during economic downturns in the past, at a fraction of a restaurant meal s cost, and now we are seeing the same kind of behavior, he said.
The company, which makes Pillsbury dough, Betty Crocker cake mixes and Old El Paso sauces, forecasts for adjusted per-share profit growth between flat and 3% in fiscal 2023.
Barclays analyst Andrew Lazar said there was a level of confidence in the ability to manage inflation despite the prevailing investor view that the pricing window for the packaged food industry is shutting down.
U.S. packaged food makers have jacked up prices of everything from candy to chocolate to protect profit margins from a rise in freight and raw material expenses.
In fiscal 2023, General Mills expects input costs to rise by 14% from 8% in the same year last year.
Net sales increased 8% to $4.89 billion in the fourth quarter, beating estimates of $4.81 billion, according to Refinitiv IBES.
Per-share profit was $1.12, above estimates of $1.01.