General Mills (GIS) to Sell Helper Business, Reshape Portfolio
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General Mills, Inc. GIS has been focused on its Accelerate strategy, part of which is related to reshaping the portfolio. Moving on these lines, the company unveiled that it inked a deal to offload its Helper main meals and Suddenly Salad side dishes businesses to Eagle Family Foods Group (which is a portfolio firm of Kelso & Company). Anticipated to conclude in the first quarter of 2023, the contract is valued at about $610 million.
This highlights the company’s focus on reshaping the portfolio and concentrating on areas with higher growth potential. Management stated that this divestiture goes in tandem with General Mills’ Accelerate strategy and enhances the company’s North America Retail unit’s growth profile. The sale of these businesses will help the company increase its focus on categories and brands with better opportunities.
Net sales from these businesses came in at roughly $235 million in fiscal 2021. Management at GIS anticipates the sale of these businesses to be dilutive to its bottom line by nearly 10-11 cents in the first 12 months post closing, before considering any probable gain from the use of sale proceeds.
Accelerate Strategy Looks Promising
General Mills is focused on its Accelerate strategy (unveiled in February 2021), which aids the company in making the choices of how to win and where to play to boost profitability while enhancing shareholder returns in the long run. Under the how to win principle, General Mills is focused on four pillars that are designed to provide competitive advantage. These include brand building, undertaking innovations, unleashing scale and maintaining business strength. The where to play principle is outlined to enhance the company’s capabilities to generate profitability through geographic and product prioritization along with portfolio restructuring. This includes prioritizing investments, investing in five Global Platforms, driving growth in Local Gem brands and reshaping the portfolio.
General Mills is focused on reshaping the portfolio to accelerate growth. Recently, the company signed a definitive agreement to acquire TNT Crust – a manufacturer of high-quality frozen pizza crusts for regional and national pizza chains, foodservice distributors and retail outlets. The company also concluded the acquisition of Tyson Foods’ pet treats business on Jul 6, 2021. The acquired business is a pioneer in natural meat treats for pets. General Mills noted that the acquisition bodes well amid growing pet-food category trends stemming from the humanization of pets, especially in the pandemic.
In November 2021, General Mills divested a 51% controlling interest in its European Yoplait operations to Sodiaal. On Nov 24, 2021, GIS unveiled plans to offload its European dough businesses to a leading ready-to-bake dough solutions company – Cerelia. The transaction includes General Mills’ branded and private-label dough businesses in Germany, the United Kingdom and Ireland, including the Knack & Back and Jus-Rol brands. These divestitures put the company a step closer to achieving Accelerate strategy priorities.
We believe that the abovementioned factors, as well as a focus on core priorities, are likely to keep this Zacks Rank #3 (Hold) company’s growth story going. Shares of the company have increased 10.7% in the past six months compared with the industry’s rise of 4.1%.
Looking for Consumer Staple Stocks? Check These
Some better-ranked stocks are Sysco Corporation SYY, McCormick & Company MKC and Medifast MED.
Sysco, which engages in the marketing and distribution of various food and related products, carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Sysco’s current financial-year sales and earnings per share (EPS) suggests growth of 32% and 122.9%, respectively, from the year-ago reported number. SYY has a trailing four-quarter earnings surprise of 9.1%, on average.
McCormick, the manufacturer, marketer and distributor of spices, seasoning mixes and condiments, currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for McCormick’s current financial-year sales and EPS suggests growth of nearly 5% and 3.9%, respectively, from the year-ago reported figure. MKC has a trailing four-quarter earnings surprise of around 1.3%, on average.
Medifast, which manufactures and distributes weight loss, weight management, healthy living products and other consumable health and nutritional products, currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Medifast’s current financial-year sales and EPS suggests growth of nearly 19% and 11.5%, respectively, from the year-ago reported figure. MED has a trailing four-quarter earnings surprise of 12.9%, on average.
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