Despite Steep Inflation, General Mills’ Sales Volumes Remain Resilient, but Shares Fully Valued

Heading into General Mills’ fiscal fourth-quarter report, we expected to see the firm’s sales volumes begin to suffer as consumers shifted from its generally higher-priced fare to value brands and private label, given steep inflation. While consumers are migrating to private brands, this is being offset by a shift from restaurants to at-home eating, and General Mills’ volumes have remained rather resilient. Fiscal 2022 sales increased 6% organically (price/mix up 7% and volumes down 1%), in line with our estimate. Another wave of price increases should increase our fiscal 2023 sales forecast from our 1% preprint estimate to be more in line with newly issued guidance of 4%-5% growth, driving a mid-single-digit expected increase in our $70 fair value estimate. With the stock up 6% on the report, shares remain fairly valued.