General Mills topped first-quarter sales and profit estimates on Wednesday, as higher prices for its breakfast cereals, snack bars and pet food products helped offset slowing demand.
Shares rose about 1% in early trading after the company maintained its annual sales and profit forecasts.
Packaged food makers have hiked prices multiple times over the past year, to counter the spiraling impact from higher labor and input costs, even as some of these expenses have now eased from their peaks.
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The higher prices have helped expand top-line and margins, volumes have taken a hit as customers have been less willing to spend on expensive food items and shifted to cheaper private label alternatives.
General Mills' gross margin rose 540 basis points to 36.1% in the first quarter. Its organic average selling prices rose 7 points, while organic volumes were down 2 points.
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Organic sales at North America retail segment grew 4% as it saw a "modest" rebuild of retailer inventory in the quarter after being hit by weaker demand in the previous quarter.
However, CEO Jeff Harmening said the company's retail market share fell in North America during the quarter, compared with a year earlier when it had "superior on-shelf availability".
"Competitors are now starting to rebuild inventory and improve their in-stock levels, which has been a challenge for General Mills," CFRA Research's Arun Sundaram said.
The company's pet food segment posted flat organic sales as customers shifted towards more value-oriented products and smaller pack sizes.
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"We are not expecting a sharp change in the economic outlook for pet parents in the near term," Harmening said, adding it would remain a headwind through fiscal 2024.
General Mills reported net sales of $4.91 billion compared with expectations of $4.88 billion, according to LSEG data.
