March 20 (Reuters) - General Mills ( GIS ) topped market

expectations for third-quarter sales and profit on Wednesday,

backed by higher prices for its breakfast cereals, snack bars

and pet food products that helped cushion a blow from slowing

demand.

Shares of the packaged food maker rose about 3% in premarket

trading after it reaffirmed its annual sales and profit targets

for a third time this year.

The last two years have seen staple food makers, including

General Mills ( GIS ), reap the benefits of consistent price hikes that

helped shield their profit margins from spiraling raw materials,

labor and supply chain costs, while seeing very little pushback

from consumers.

However, sticky inflation and higher borrowing costs have

now made customers more cautious with spending on expensive

branded products and focus on buying cheaper private-label

alternatives that are gaining more shelf space at retailers.

General Mills' ( GIS ) gross margins rose 100 basis points

year-on-year to 33.5%, helped by an increase in organic average

selling prices in the third quarter.

Still, the company's quarterly organic volumes declined,

joining peers such as Kraft Heinz ( KHC ) in seeing softer

demand.

The Minnesota-based company had most recently maintained its

forecast in February, having previously reiterated it in

September.

In the third quarter, the company also recorded $31 million

of net recoveries related to a voluntary recall of certain

international Häagen-Dazs ice cream products in fiscal 2023.

Its net sales dropped about 1% to $5.1 billion in the third

quarter, compared with analysts' expectations of sales to drop

about 3.1% to $4.97 billion, according to LSEG data.

Excluding one-off charges, General Mills ( GIS ) earned $1.17 per

share in the quarter ended Feb. 25, compared with estimates of

$1.05.