GIS Protects Its Margins – And Provides A Playbook For Other Consumer Staples

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The one stock star amid the doom and gloom this week is General Mills (GIS) which reported earnings Wednesday morning. The maker of Cheerios and Betty Crocker cake mix is the first company I’m aware of that seems to have responded forcefully to inflation by taking large price increases. As a result, organic sales were +13% and gross margin increased 240 basis points quarter over quarter in the quarter ended May 29. EPS increased 23% year over year to $1.12. GIS shares are +9.38% over the last five days to 52-week highs.

Without question, other consumer staples companies have taken notice and will take a page from GIS’s playbook. I’ve been annoyed with my consumer staples holdings that have allowed inflation to eat away at their margins instead of getting ahead of it. GIS’s results suggest to me that this is about to change.

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