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General Mills, Inc. (NYSE: GIS) reported its fiscal 2025 first-quarter results, showing a mixed performance across key financial metrics. Net sales for the quarter were $4.8 billion, a decline of 1% compared to the same period last year. Organic net sales also mirrored this 1% drop, driven primarily by unfavorable net price realization and mix.
Operating profit took a significant hit, dropping 11% to $832 million, while adjusted operating profit fell by 4% in constant currency to $865 million. Diluted earnings per share (EPS) stood at $1.03, down 10%, with adjusted diluted EPS at $1.07, reflecting a 2% decrease in constant currency.
Breaking down the performance by segments, the North America Retail segment saw a 2% decline in net sales to $3.0 billion, influenced by lower pound volume. The North America Pet segment also experienced a 1% drop in net sales to $576 million, driven by unfavorable net price realization and mix.
The North America Foodservice segment remained flat at $536 million, while the International segment’s net sales were essentially unchanged at $717 million. Despite these challenges, the North America Foodservice segment posted a 21% increase in operating profit, indicating some areas of strength within the company.
General Mills Beats Expectations in Fiscal 2025 Q1
When comparing the current performance against expectations, General Mills fell slightly short. Analysts had anticipated an EPS of $1.05 and revenue of $4.77 billion for the quarter. The actual EPS of $1.03 missed the mark by $0.02 but the adjusted EPS of $1.07 exceeded the expectations, while the revenue of $4.8 billion slightly exceeded expectations by $0.03 billion.
The company’s overall performance was influenced by several factors, including input cost inflation and higher selling, general, and administrative (SG&A) expenses, which included increased media investment.
Gross margin decreased by 130 basis points to 34.8% of net sales, largely due to input cost inflation and unfavorable mark-to-market effects.The North America Retail segment’s 2% decline in net sales was primarily due to lower pound volume, although this was partially offset by favorable net price realization and mix. In contrast, the North America Pet segment’s operating profit increased by 7%, driven mainly by Holistic Margin Management (HMM) cost savings and lower other supply chain costs.
The International segment faced significant challenges, with a 58% drop in operating profit due to input cost inflation and higher SG&A expenses, despite some growth in Europe & Australia and distributor markets. The company’s overall operating profit margin decreased by 180 basis points to 17.2%.
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Guidance
General Mills reaffirmed its full-year fiscal 2025 outlook, despite the mixed results in the first quarter. The company expects organic net sales to range between flat and up 1% for the full year. Adjusted operating profit is anticipated to be between down 2% and flat in constant currency, while adjusted diluted EPS is projected to range from down 1% to up 1% in constant currency. The company also aims for a free cash flow conversion of at least 95% of adjusted after-tax earnings.
These targets do not yet reflect the impact of the proposed North American Yogurt divestitures, which are expected to be incorporated into the outlook after the transactions close in calendar 2025. General Mills remains focused on executing its Accelerate strategy, which aims to drive sustainable, profitable growth and top-tier shareholder returns. The strategy emphasizes building brands, relentless innovation, leveraging scale, and standing for good. CEO Jeff Harmening highlighted the company’s commitment to improving competitiveness and leading growth in its categories through superior product innovation and increased investment.
The company also plans to generate HMM cost savings of approximately 4 to 5% of the cost of goods sold, exceeding the anticipated input cost inflation of 3 to 4%. This margin flexibility is expected to be reinvested in the business to drive improved volume performance.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
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