NEW YORK (Reuters) � U.S. packaged foods maker General Mills Inc (GIS.N) reported quarterly sales that missed Wall Street's view but affirmed its full-year profit target, saying growth should accelerate as the year progresses.
Quarterly profit was hurt by higher commodity costs and advertising expenses, as the maker of Cheerios cereal, Pillsbury baked goods and Green Giant frozen vegetables works harder to make its brands stand out in a weak economy.
"The global operating environment is still quite challenging, but our food businesses are resilient," General Mills Chief Executive Ken Powell said in a statement.
He did not give an update on a disagreement with the owners of the Yoplait yogurt brand, which General Mills sells in the United States.
Earlier this month General Mills said the French dairy company from which it licenses the trademark wants to renegotiate the terms of a deal the companies have had for more than 30 years. General Mills said it had filed a petition for arbitration over the issue.
The disagreement comes as French private equity fund PAI Partners, which owns 50 percent of Yoplait, is looking to unload its stake.
General Mills has been named as a possible suitor, with a British newspaper report on Sunday saying it was mulling a bid of over $1 billion. The company declined to comment at the time.
SALES TO STORES RISE
General Mills said on Wednesday that it still expects fiscal 2011 earnings of $2.46 to $2.48 per share, excluding the impact of revaluing certain commodity positions.
In its fiscal first quarter that ended on August 29, General Mills' net income was $472.1 million, or 70 cents per share, up from $420.6 million, or 62 cents per share, a year earlier.
Excluding items, earnings were 64 cents per share, topping analysts' average estimate of 63 cents per share, according to Thomson Reuters I/B/E/S, by a penny.
Net sales rose 1.5 percent to $3.53 billion, missing analysts' average estimate of $3.57 billion. Increased sales volume boosted net sales by 2 percentage points while foreign exchange rates reduced it by 1 percentage point.
In the company's U.S. retail segment, its largest business, sales rose 2 percent, helped by increases in sales volume and average price. Yet the segment's operating profit was 3 percent lower, due to higher commodity costs and advertising expenses.
The retail business saw net sales rise 4 percent for cereals, 5 percent for snacks, 4 percent for yogurt and 3 percent for meal products such as Old El Paso Mexican foods and Macaroni Grill frozen entrees. Pillsbury sales fell 3 percent.
Shares of the company were unchanged at $35.67 in pre-market trading from their close on Tuesday.
(Reporting by Martinne Geller; Editing by Lisa Von Ahn, Maureen Bavdek, Dave Zimmerman)
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