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General Mills, Inc. (NYSE: GIS) revealed its financial results for the fourth quarter of fiscal 2024, showcasing a mixed performance amidst a challenging market environment. Net sales for the quarter stood at $4.7 billion, marking a 6% decrease from the previous year. This decline was attributed to unfavorable net price realization and mix and lower pound volume. The company’s operating profit also saw a downturn, falling by 5% to $779 million. Adjusted operating profit, which excludes certain items, was down 10% in constant currency, amounting to $800 million.

Despite these setbacks, General Mills achieved a gross margin of 35.8%, an increase of 140 basis points from the previous year. This improvement was driven by cost savings from its Holistic Margin Management (HMM) initiative, favorable mark-to-market effects, and reduced supply chain costs.However, input cost inflation and unfavorable net price realization partially offset these gains. The company’s diluted earnings per share (EPS) for the quarter were $0.98, a decline of 5%, while adjusted diluted EPS fell by 10% in constant currency to $1.01.

General Mills Falls Short of Expectations in Q4

When comparing the actual results to market expectations, General Mills fell short in both earnings and revenue for the quarter. Analysts had anticipated an EPS of $1.00, but the actual EPS came in slightly lower at $0.98. Similarly, the revenue expectation was set at $4.86 billion, yet the company reported $4.7 billion, missing the mark by approximately $160 million. This shortfall can be attributed to several factors, including a reduction in retailer inventory and a headwind in the International segment’s results.

The company’s performance in the North America Retail segment was particularly concerning, with net sales down 7% to $2.85 billion and segment operating profit dropping by 14%. The Pet segment also faced challenges, with net sales declining by 8% to $602 million. However, there were some bright spots, such as the North America Foodservice segment, which saw a 4% increase in net sales to $589 million, driven by strong growth in breads, cereal, and frozen biscuits.

Despite these mixed results, General Mills’ management remains optimistic. CEO Jeff Harmening emphasized the company’s ability to pivot its plans and enhance efficiency in response to the challenging environment. He highlighted the improved volume performance in the second half of the year and industry-leading levels of HMM cost savings as key achievements.

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GIS Expects Net Sales Growth to Range Between Flat and Up 1%

Looking ahead to fiscal 2025, General Mills provided a cautious yet optimistic outlook. The company expects organic net sales growth to range between flat and up 1%, reflecting a gradual improvement in volume trends across its categories. Adjusted operating profit is projected to be between down 2% and flat in constant currency from the base of $3.6 billion reported in fiscal 2024. This forecast includes a 2-point headwind from resetting incentive compensation after a below-average payout in the prior year.

Adjusted diluted EPS for fiscal 2025 is expected to range from down 1% to up 1% in constant currency from the base of $4.52 earned in fiscal 2024. General Mills also aims for free cash flow conversion to be at least 95% of adjusted after-tax earnings. The company plans to generate HMM cost savings of roughly 4 to 5% of the cost of goods sold, which is anticipated to exceed the expected input cost inflation of 3 to 4%.

Disclaimer: The author does not hold or have a position in any securities discussed in the article.

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