The Brutal Math of Narrow Profit Margins: General Mills Profit Drops 14% on 1% Sales Drop

Gaius · 2024-09-19T18:40:11.296Z

Jezcoe:

They are making less money but somehow are still able to find a couple hundred million to buy back stock.

I don’t see that as brutal.

The 14x multiplier is brutal, but yes they are making a profit and since the outlook for their economy is bleak they see no need to increase production.

Leaving them with three choices

Use it to pay down debt (my preference)
Return the profits to shareholders (Their choice)
Give it away to provide free surgery for recently castrated Hezballah terrorists,

Jezcoe · 2024-09-19T18:42:07.284Z

Gaius:

outlook for their economy is bleak

They say in their quarterly statements the exact opposite.

Gaius · 2024-09-19T19:02:50.685Z

Their forward-looking statements anticipated 2025 would see

cost reductions (layoffs) “roughly 4 to 5 percent of cost of goods sold”
“Organic net sales are expected to range between flat and up 1 percent.”
“Adjusted operating profit is expected to range between down 2 percent . . .”

You don’t have to call it bleak, but clearly, they are not looking for people to start eating more name-brand cereal and name-brand cookies. Business is going down, not up and they see zero need to invest and expand . . . but now I’m getting off topic.

biggestal99 · 2024-09-19T19:08:29.018Z

General Mills stock is only up 13% this year.

thats really bad for the stockholders.

Allan

Jezcoe · 2024-09-19T19:09:04.039Z

Gaius:

Their forward-looking statements anticipated 2025 would see

cost reductions (layoffs) “roughly 4 to 5 percent of cost of goods sold”

“Organic net sales are expected to range between flat and up 1 percent.”

“Adjusted operating profit is expected to range between down 2 percent . . .”

You don’t have to call it bleak, but clearly, they are not looking for people to start eating more name-brand cereal and name-brand cookies. Business is going down, not up and they see zero need to invest and expand . . . but now I’m getting off topic.

They are still profiting and doing hundreds of millions in stock buybacks but you think that they are going to do layoffs to offset that they aren’t making as much money?

Plus if you look into their statement it looks like one of the major drags is the organic brands.

Makes sense… they are higher cost to consumer and offer no real benefit other than good feelings.

Gaius · 2024-09-19T19:14:22.155Z

Jezcoe:

They are still profiting and doing hundreds of millions in stock buybacks but you think that they are going to do layoffs to offset that they aren’t making as much money?

Yup.
Grandma has money invested.
The company predicts growth will be flat to mildly negative.

It should pay down its debt
but it has chosen a combination of cost-cutting and returning the profits to investors.

Gaius · 2024-09-19T19:16:04.079Z

biggestal99:

General Mills stock is only up 13% this year.

thats really bad for the stockholders.

Allan

How much would it be up if they hadn’t used their profits to buy back stock?

Jezcoe · 2024-09-19T19:19:35.931Z

Gaius:

The company predicts growth will be flat to mildly negative.

The myth of infinite growth has hurt many companies.

Being very profitable isn’t enough… they must be wildly profitable.

Gaius:

it has chosen a combination of cost-cutting and returning the profits to investors.

This is why labor unions are needed.

LucyLou · 2024-09-19T19:28:34.765Z

“Brutal” is no where to be found though.

Gaius · 2024-09-19T19:37:41.932Z

LucyLou:

“Brutal” is no where to be found though.

Incorrect.
"Profitless: is nowhere to be found (but I did not say that. I said the math is brutal.)
“Taking a loss” is nowhere to be found (but I did not say that. I said the math is brutal.)
“Stock doing down” is nowhere to be found, (but I did not say that. I said the math is brutal)
“Company in touble” is nowhere to be found (but I did not say that. I said the math is brutal.)

The 14-to-1 math is brutal, and that is what I said.
Is my phrase “The Brutal Math of Narrow Profit Margins” really genuinely that hard to understand?

Guvnah · 2024-09-19T21:19:51.832Z

Gaius:

really genuinely that hard to understand?

The libs are extra trollish today.

Gaius · 2024-09-19T21:21:00.798Z

Guvnah:

Gaius:

really genuinely that hard to understand?

The libs are extra trollish today.

Yeah but we should keep the around.
Once in a while they provide thoughtful input.

Gaius · 2024-09-19T21:29:56.384Z

A local apple-picker picked 1% fewer apples today
he lost 14% of his wages. MAN that was brutal.

(Notice I didn’t say he took a net loss etc., just that the math is brutal.)

Guvnah · 2024-09-19T21:46:45.834Z

Gaius:

he lost 14% of his wages. MAN that was brutal.

But he still made money!

Gaius · 2024-09-19T22:45:40.742Z

Oh, FedEX also report earnings today.
Revenue dropped 0.5% leading to a 26.5% drop in profits.

Utalbray!

.

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Roxiebelle · 2024-09-19T23:02:16.787Z

Here is what I found with a quick internet search for the average profit margin for groceries.

The average profit margin in grocery stores is between 1 percent and 3 percent. Conventional grocery store chains have an average profit margin of about 2.2%. This means that for every dollar of sale a grocery store has, they make 2.2 cents of profit. However, natural, organic, and gourmet stores tend to have profit margins in the 5-10% range. Grocery stores make money on volume, so they’re counting on customers to buy many items per shopping trip.

I’ve seen and heard it reported that grocery margins are razor thin and Kamrad Kamala’s whacked out idea of government pricing control would put us all in bread lines. It seems to me the only price gouging going on at the supermarket are the natural/organic items and those that go to gourmet stores, which are typically leftist liberal elites.

Guvnah · 2024-09-19T23:20:45.739Z

Roxiebelle:

This means that for every dollar of sale a grocery store has, they make 2.2 cents of profit.

And for every dollar that “walks” out of the store via shoplifting, the store has to do $50 in sales to pay for it. (And when a guy shoplifts a $20 bottle of laundry detergent, it takes the profit from the next $1000 in sales to compensate.)

But hey … $950 in shoplifting is now not a serious issue according to some local laws.

Gaius · 2024-09-20T00:26:15.379Z

To be in the S&P 500 index a company needs to be normally profitable
(Outside the S&P ~40% of corporations are not.).

37 of those 500 companies have profit margins > 30%.
~10 of them are listed below.

88 of those companies have profit margins below 5%.
~20 of them are also listed
For them the brutal math applies.
A misguided policy from inside the beltway could wipe out a lot of profit, a lot of jobs, and a lot of grandma’s retirement fund.

(All profit margins as per most recent fiscal year)

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Gaius · 2024-09-20T14:33:38.544Z

It works in both direction btw.

Darden’s Restaurants, owners of Olive Garden, Longhorn Steakhouse, Ruth’s Chris etc. also reported: Their same-store (gross) sales rose 1% this Q vs same Q last year
causing their same-store profit to rise 6.5%.

Hmm what’s the antonym of “brutal?”
Well whatever it is, this serves as an example there is a HUGE impact between

a good policy that causes a 1% upswing in sales,
-vs-
a bad one, which causes a 1% downturn.

CNBC – 19 Sep 24

Darden Restaurants earnings disappoint as Olive Garden, fine dining sales...

Olive Garden parent Darden Restaurants reported weaker-than-expected earnings and revenue for its fiscal first quarter.

Camp · 2024-09-23T13:47:11.822Z

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