March 14, 2014 / 11:47 AM / 5 years ago

General Mills warns profit hit by competition

(Reuters) - U.S. packaged foods group General Mills Inc (GIS.N) estimated third-quarter earnings below analysts’ expectations as it faces increased competition from store brands and spends more on marketing its yogurts.

Shares of the company, known for its Yoplait yogurt, Cheerios cereal and Haagen-Dazs ice cream, fell 2 percent in early trading on the New York Stock Exchange.

General Mills and rivals such as Kellogg Co (K.N) and Campbell Soup Co (CPB.N) have been battling increasing competition from cheaper store-branded foods as shoppers look for bargains amid lingering economic uncertainty.

“The weakness in the quarter is not altogether surprising given the trends across U.S. packaged food,” BMO Capital Markets analyst Kenneth Zaslow wrote in a note to clients.

“However, the magnitude of the weakness is greater than we anticipated.”

General Mills, which also makes Betty Crocker dessert mixes, said sales and operating profit for the third quarter ended February 23 will reflect about 1 percent lower volume.

It noted that the decline was in line with recent food industry trends in developed markets.

The company said it expects adjusted earnings of 61-62 cents per share for the third quarter.

Analysts on average expect a profit of 68 cents per share, according to Thomson Reuters I/B/E/S.

General Mills also said it expects third-quarter operating profit for its U.S. retail business, its largest by revenue, to be 10-11 percent below year-ago results.

The company, which reaffirmed its adjusted earnings forecast for the year, will report third-quarter results on March 19.

General Mills’ shares were down 2 percent at $50.01 in morning trading. They have risen about 10 percent in the past year.

Reporting by Maria Ajit Thomas in Bangalore; Editing by Saumyadeb Chakrabarty

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