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GIS Q1 Earnings Top, Organic Sales Dip on Unfavorable Pricing
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General Mills, Inc. (GIS - Free Report) posted first-quarter fiscal 2025 results, wherein the top and bottom lines came ahead of the Zacks Consensus Estimate, while both metrics declined year over year. Results were hurt by the adverse net price realization and mix.
General Mills’ primary focus for fiscal 2025 is on fueling organic net sales growth, and the company progressed well toward that goal in the first quarter. GIS solidified its core by providing consumers with more exceptional experiences, resulting in improved volume, net sales and market share trends sequentially. The company also took a bold step in reshaping its portfolio with the proposed sale of its North American Yogurt business.
General Mills aims to enhance its competitiveness and regain leadership in category growth. The company plans to achieve this by delivering superior product innovation, backed by increased investments funded by strong savings from its Holistic Margin Management (“HMM”) efforts. Given these plans and the first-quarter performance, management reiterated its guidance for fiscal 2025.
The company remains committed to its Accelerate strategy, which is based on four pillars that include building brands, undertaking constant innovation, leveraging scale and standing for good. General Mills continues to focus on core markets, global platforms and local gem brands with growth prospects. It is also committed to reshaping its portfolio through prudent buyouts and divestitures.
General Mills, Inc. Price, Consensus and EPS Surprise
GIS’ Quarterly Performance: Key Metrics and Insights
General Mills posted adjusted earnings of $1.07 per share, which beat the Zacks Consensus Estimate of $1.05. However, the bottom line declined 2% year over year on a constant-currency (cc) basis. The downside can be attributed to the lower adjusted operating profit, elevated net interest expenses and an increased adjusted effective tax rate, partly made up by reduced shares outstanding.
GIS reported net sales of $4,848.1 million, which surpassed the Zacks Consensus Estimate of $4,780 million. The top line decreased 1% due to the adverse net price realization and mix. Organic sales also dipped 1% due to the same factors. We had expected organic sales to decline 2.3% in the first quarter.
The adjusted gross margin remained nearly flat year over year at 35.4% as gains from HMM cost savings were countered by input cost inflation and the adverse net price realization and mix. We had expected the adjusted gross margin to contract 10 bps in the quarter under review.
The adjusted operating profit came in at $865 million, down 4% at cc due to lower adjusted gross profit and increased adjusted SG&A costs. The adjusted operating profit margin contracted 50 bps to 17.8%. Our model suggested an adjusted operating margin contraction of 70 bps.
Decoding GIS’ Segmental Performance
Starting fiscal year 2025, General Mills has rebranded its previous Pet segment as North America Pet to emphasize that pet food sales outside of North America are now included in its International segment.
North America Retail: Revenues in the segment came in at $3,016.6 million, down 2% year over year due to reduced pound volume, partly made up by the positive net price realization and mix. Organic net sales also fell 2%. The segment’s operating profit declined by 7% to $746 million.
International: Revenues in the segment came in at $717 million, flat year over year, as increased pound volume (including impacts of Edgard & Cooper acquisition) was negated by the adverse net price realization and currency headwinds. Organic net sales fell 1% due to softness across China. The segment’s operating profit slumped from $50 million to $21 million.
North America Pet: Revenues came in at $576.1 million, down 1% year over year. Revenues were hurt by unfavorable net price realization and mix, partly made up by increased pound volume. Segmental organic sales also declined 1%. The segment’s operating profit came in at $119 million, up 7% on a year-over-year basis.
North America Foodservice: Revenues came in at $536.2 million, flat year over year. Also, organic net sales were flat. Sales growth across breads, biscuits, snacks and baking mixes were offset by bakery flour and pizza crust declines. The segment’s operating profit grew 21% to $72 million.
GIS’ Financial Health Snapshot & Other Developments
General Mills ended the quarter with cash and cash equivalents of $468.1 million, long-term debt of $11,431.3 million and total stockholders’ equity (excluding noncontrolling interests) of $9,275.6 million.
GIS generated $624 million in cash from operating activities in the first quarter. Capital investments amounted to $140 million during the same period. The company paid out dividends worth $338 million and bought nearly 4.5 million shares for $300 million in the first quarter.
Constant-currency sales from the joint venture of Cereal Partners Worldwide increased 1% in the first quarter. For Haagen-Dazs Japan, sales were flat year over year at cc.
General Mills recently announced that it has reached definitive agreements to sell its North American Yogurt business to French dairy leaders Lactalis and Sodiaal in cash deals totaling $2.1 billion. These transactions are anticipated to close in 2025. The combined transactions are expected to reduce General Mills' adjusted diluted EPS by about 3% within the first 12 months post-closing.
What to Expect From GIS in Fiscal 2025?
Despite ongoing economic uncertainty affecting consumers in its main markets, General Mills anticipates improvement in volume trends for its categories in fiscal 2025. However, the overall category dollar growth for the year is likely to fall short of the company's long-term growth targets. To boost organic net sales, General Mills aims to create robust experiences with its top food brands, which should lead to better household penetration and increased market share compared to the previous year.
In fiscal 2025, General Mills plans to launch new products and innovations centered on taste, health, convenience and value. The company expects to achieve cost savings of around 4-5% of the cost of goods sold through HMM initiatives, which is likely to surpass its anticipated input cost inflation of 3-4%. GIS plans to reinvest any potential margin gains into the business, boosting its investment in brand-building efforts to enhance volume performance in fiscal 2025.
For fiscal 2025, organic net sales are anticipated to range between a flat and a 1% increase. The adjusted operating profit growth at cc is anticipated between a decline of 2% and flat. Management anticipates adjusted earnings per share (EPS) growth between down 1% and an increase of 1% at cc. The company envisions a free cash flow conversion of at least 95% of adjusted after-tax earnings.
This Zacks Rank #3 (Hold) company’s shares have risen 11.8% in the past three months compared with the industry’s growth of 8.6%.
Better-Ranked Staple Stocks
Here, we have highlighted three better-ranked food stocks — The Chef's Warehouse (CHEF - Free Report) , Flowers Foods (FLO - Free Report) and McCormick & Company, Inc. (MKC - Free Report) .
CHEF has a trailing four-quarter earnings surprise of 33.7%, on average. The Zacks Consensus Estimate for The Chef’s Warehouse’s current fiscal year sales and earnings indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Flowers Foods, one of the largest producers of packaged bakery foods in the United States, currently carries a Zacks Rank #2 (Buy). FLO has a trailing four-quarter earnings surprise of 1.9%, on average.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and earnings implies growth of around 1% and 5%, respectively, from the year-ago reported numbers.
McCormick is a leading manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors. It currently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for McCormick & Company’s current fiscal-year sales and earnings indicates advancements of 0.1% and 5.6%, respectively, from the year-ago reported figures. MKC has a trailing four-quarter earnings surprise of 8.3%, on average.
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General Mills, Inc. (GIS - Free Report) posted first-quarter fiscal 2025 results, wherein the top and bottom lines came ahead of the Zacks Consensus Estimate, while both metrics declined year over year. Results were hurt by the adverse net price realization and mix.
General Mills’ primary focus for fiscal 2025 is on fueling organic net sales growth, and the company progressed well toward that goal in the first quarter. GIS solidified its core by providing consumers with more exceptional experiences, resulting in improved volume, net sales and market share trends sequentially. The company also took a bold step in reshaping its portfolio with the proposed sale of its North American Yogurt business.
General Mills aims to enhance its competitiveness and regain leadership in category growth. The company plans to achieve this by delivering superior product innovation, backed by increased investments funded by strong savings from its Holistic Margin Management (“HMM”) efforts. Given these plans and the first-quarter performance, management reiterated its guidance for fiscal 2025.
The company remains committed to its Accelerate strategy, which is based on four pillars that include building brands, undertaking constant innovation, leveraging scale and standing for good. General Mills continues to focus on core markets, global platforms and local gem brands with growth prospects. It is also committed to reshaping its portfolio through prudent buyouts and divestitures.
General Mills, Inc. Price, Consensus and EPS Surprise
General Mills, Inc. price-consensus-eps-surprise-chart | General Mills, Inc. Quote
GIS’ Quarterly Performance: Key Metrics and Insights
General Mills posted adjusted earnings of $1.07 per share, which beat the Zacks Consensus Estimate of $1.05. However, the bottom line declined 2% year over year on a constant-currency (cc) basis. The downside can be attributed to the lower adjusted operating profit, elevated net interest expenses and an increased adjusted effective tax rate, partly made up by reduced shares outstanding.
GIS reported net sales of $4,848.1 million, which surpassed the Zacks Consensus Estimate of $4,780 million. The top line decreased 1% due to the adverse net price realization and mix. Organic sales also dipped 1% due to the same factors. We had expected organic sales to decline 2.3% in the first quarter.
The adjusted gross margin remained nearly flat year over year at 35.4% as gains from HMM cost savings were countered by input cost inflation and the adverse net price realization and mix. We had expected the adjusted gross margin to contract 10 bps in the quarter under review.
The adjusted operating profit came in at $865 million, down 4% at cc due to lower adjusted gross profit and increased adjusted SG&A costs. The adjusted operating profit margin contracted 50 bps to 17.8%. Our model suggested an adjusted operating margin contraction of 70 bps.
Decoding GIS’ Segmental Performance
Starting fiscal year 2025, General Mills has rebranded its previous Pet segment as North America Pet to emphasize that pet food sales outside of North America are now included in its International segment.
North America Retail: Revenues in the segment came in at $3,016.6 million, down 2% year over year due to reduced pound volume, partly made up by the positive net price realization and mix. Organic net sales also fell 2%. The segment’s operating profit declined by 7% to $746 million.
International: Revenues in the segment came in at $717 million, flat year over year, as increased pound volume (including impacts of Edgard & Cooper acquisition) was negated by the adverse net price realization and currency headwinds. Organic net sales fell 1% due to softness across China. The segment’s operating profit slumped from $50 million to $21 million.
North America Pet: Revenues came in at $576.1 million, down 1% year over year. Revenues were hurt by unfavorable net price realization and mix, partly made up by increased pound volume. Segmental organic sales also declined 1%. The segment’s operating profit came in at $119 million, up 7% on a year-over-year basis.
North America Foodservice: Revenues came in at $536.2 million, flat year over year. Also, organic net sales were flat. Sales growth across breads, biscuits, snacks and baking mixes were offset by bakery flour and pizza crust declines. The segment’s operating profit grew 21% to $72 million.
GIS’ Financial Health Snapshot & Other Developments
General Mills ended the quarter with cash and cash equivalents of $468.1 million, long-term debt of $11,431.3 million and total stockholders’ equity (excluding noncontrolling interests) of $9,275.6 million.
GIS generated $624 million in cash from operating activities in the first quarter. Capital investments amounted to $140 million during the same period. The company paid out dividends worth $338 million and bought nearly 4.5 million shares for $300 million in the first quarter.
Constant-currency sales from the joint venture of Cereal Partners Worldwide increased 1% in the first quarter. For Haagen-Dazs Japan, sales were flat year over year at cc.
General Mills recently announced that it has reached definitive agreements to sell its North American Yogurt business to French dairy leaders Lactalis and Sodiaal in cash deals totaling $2.1 billion. These transactions are anticipated to close in 2025. The combined transactions are expected to reduce General Mills' adjusted diluted EPS by about 3% within the first 12 months post-closing.
What to Expect From GIS in Fiscal 2025?
Despite ongoing economic uncertainty affecting consumers in its main markets, General Mills anticipates improvement in volume trends for its categories in fiscal 2025. However, the overall category dollar growth for the year is likely to fall short of the company's long-term growth targets. To boost organic net sales, General Mills aims to create robust experiences with its top food brands, which should lead to better household penetration and increased market share compared to the previous year.
In fiscal 2025, General Mills plans to launch new products and innovations centered on taste, health, convenience and value. The company expects to achieve cost savings of around 4-5% of the cost of goods sold through HMM initiatives, which is likely to surpass its anticipated input cost inflation of 3-4%. GIS plans to reinvest any potential margin gains into the business, boosting its investment in brand-building efforts to enhance volume performance in fiscal 2025.
For fiscal 2025, organic net sales are anticipated to range between a flat and a 1% increase. The adjusted operating profit growth at cc is anticipated between a decline of 2% and flat. Management anticipates adjusted earnings per share (EPS) growth between down 1% and an increase of 1% at cc. The company envisions a free cash flow conversion of at least 95% of adjusted after-tax earnings.
This Zacks Rank #3 (Hold) company’s shares have risen 11.8% in the past three months compared with the industry’s growth of 8.6%.
Better-Ranked Staple Stocks
Here, we have highlighted three better-ranked food stocks — The Chef's Warehouse (CHEF - Free Report) , Flowers Foods (FLO - Free Report) and McCormick & Company, Inc. (MKC - Free Report) .
The Chef’s Warehouse, which engages in the distribution of specialty food products, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CHEF has a trailing four-quarter earnings surprise of 33.7%, on average. The Zacks Consensus Estimate for The Chef’s Warehouse’s current fiscal year sales and earnings indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Flowers Foods, one of the largest producers of packaged bakery foods in the United States, currently carries a Zacks Rank #2 (Buy). FLO has a trailing four-quarter earnings surprise of 1.9%, on average.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and earnings implies growth of around 1% and 5%, respectively, from the year-ago reported numbers.
McCormick is a leading manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors. It currently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for McCormick & Company’s current fiscal-year sales and earnings indicates advancements of 0.1% and 5.6%, respectively, from the year-ago reported figures. MKC has a trailing four-quarter earnings surprise of 8.3%, on average.