The recent quarterly earnings report from General Mills (NYSE:GIS), the manufacturer behind Betty Crocker and Cheerios, issued some mixed numbers. While its quarterly profit came in at better-than-expected levels, its overall sales actually dropped. This is very interesting because sales in the United States did go up by 1%. However, in global terms, the company reported a sales slowdown.
This should not be a surprise. After all, the US dollar is surging and it has made American companies’ products which are denominated in US dollars less attractive. As these companies’ products appear more expensive, their sales normally suffer. You only need to look at Microsoft, Caterpillar, and Procter & Gamble to see this effect in action. General Mills is not immune to this global effect.
If you are looking for a reason to buy this stock, one key reason is that the company is looking to expand its presence in the fastest-growing segments of the US food market. These fastest-growing segments, of course, involve organic or natural foods. As American consumers’ tastes change and gravitate towards more natural fare, General Mills is sure to profit. Still, the big question mark as far as this company’s overall sales figures are concerned is its international presence.
The strong US dollar poses a firm downward pressure on sales growth for this company on a global basis. Dollar hedging can only protect its sales for so long. It remains to be seen how long General Mills can keep up against the downward sales pressure caused by the strengthening US dollar.