General Mills, Inc. (GIS) on Q4 2024 Results - Earnings Call Transcript
Operator: Good morning and welcome to General Mills Fourth Quarter Fiscal 2024 Earnings Conference Call. All participants are in a listen-only mode. After the speakers' remarks, we will have a question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Jeff Siemon, Vice President of Investor Relations and Treasurer. Please go ahead. Jeff Siemon: Thank you, Julianne, and good morning, everyone. Thank you for joining us today for our Q&A session on our Fourth Quarter and Full Year Fiscal '24 Results. I hope everyone had time to review our press release, listen to our prepared remarks, and view our presentation materials, which we made available this morning on our Investor Relations website. It's important to note that in our Q&A session, we may make forward-looking statements that are based on management's current views and assumptions. So please refer to this morning's press release for factors that could impact forward-looking statements and for reconciliations of non-GAAP information, which we may be discussing on today's call. I'm here this morning with Jeff Harmening, our Chairman and CEO; and Kofi Bruce, our CFO. So I think we can go ahead and get to the first question. Julianne, can you please get us started? Operator: Certainly. [Operator Instructions] Our first question will come from Ken Goldman from JPMorgan. Please go ahead. Your line is open. Kenneth Goldman: Hi. Thank you very much. I appreciate it. I wanted to under -- make sure rather that I understood the dynamics in International, it's a bit of a specific question to start, but the commentary in the prepared remarks, about consumer challenges might indicate that volume would have been more pressured than price-mix, but it was the latter that was down by a greater degree. So I'm just curious if you can walk us through the dynamic there and if there were any unusual puts and takes this past quarter. And then I have a broader follow-up. Kofi Bruce: Ken, thanks for the question. This is Kofi. So as you know, our organic sales were down 10% in International in Q4. A bit more than half of that came from a reclassification from net sales to cost-of-goods-sold in Q4, an adjustment that was immaterial to the company's full year results, but obviously important in the quarter for the segment. The rest of the decline in International was really a function of the difficult market conditions in both Brazil and China. Our Brazil performance, specifically both the consumer environment and value challenges at the shelf as well as the customer environment where customers were reducing inventory levels pretty significantly versus last year. And then China, after a strong start to the year, we saw a real souring or downturn in consumer sentiment in the quarter that had a negative impact on our shop traffic for Haagen-Dazs and our premium dumpling business. So that's -- Kenneth Goldman: I'm sorry, Kofi. Kofi Bruce: Yeah, that's bulk of it. Yeah. Kenneth Goldman: Thank you. I'm stepping on your words, I apologize, but I appreciate that. The follow-up is, and thank you for all the detailed guidance you always provide from top-to-bottom in the P&L every year. I'm curious if you could break out for us a little bit of the cadence of the top-line and EPS growth this year and in particular if there's any considerations as we think about modeling the first quarter. Kofi Bruce: Yeah, I think, the -- we won't get too detailed, other than to just note that our Q1 results, we would expect to trend below the balance of the rest of the year, primarily driven by higher levels of investment as we step into the year with a focus on improved volume, and then obviously, the comparison against our strongest quarter performance in fiscal '24. Operator: Our next question comes from Andrew Lazar from Barclays. Please go ahead. Your line is open. Andrew Lazar: Great. Thanks. Good morning, everybody. Jeffrey Harmening: Good morning. Kofi Bruce: Good morning, Andrew. Andrew Lazar: Maybe, Jeff, to start off, I know in the prepared remarks you discussed sort of a clear mission to drive better volume results through reinvestment, which I know is contemplated in your outlook for '25. And you mentioned prominently the need to improve sort of the value equation for consumers, even mentioning optimizing price points in certain areas, a 20% increase in coupon spending sort of as examples. And I know the consumer measures value in lots of different ways, not just price, so I was hoping to get maybe a better sense of how the mix of incremental spending for '25 is sort of broken out across what would you consider higher-quality sort of brand equity building versus, let's say, more trade or price-oriented spend, particularly as this is such a sort of a hot button topic among investors right now. Jeffrey Harmening: Yeah, thank you, Andrew. That's right. I mean, improving value is really the number one mission we have to get competitiveness. If I take a step back and look at this past year, our categories in terms of volume performance and comp performance improved through the first half of the last year, which was -- they were down 2.4% in terms of volume or categories to up 0.5% in the fourth quarter. And I think that's important because as we had talked about previously, there were a few events in the back half of our fiscal year, which we thought would improve category performance and they did -- gradually they did, and that really is the lapping of pricing from a year-ago, lapping of SNAP benefits and the on-shelf availability of private-label and some other smaller brands. And so that indeed took place, and so the job for us to do now is to increase our level of competitiveness. And the fact is that inflation has been higher than longer, higher for longer than many people assumed it would be, not in food necessarily. Actually food inflation is actually coming down. But if you look at the broader macroeconomic environment, we're still seeing inflation of 3% to 4% in the broader environment. And so the job to do is create more value for our consumers. As you rightly point out, that value can take place in a variety of ways. And I guess I would start at the point of brand communication. And the fact of the matter is, we will have a meaningful increase in the amount of spending we have on consumer spending next year. You've probably done the math and seen that our productivity levels are higher than what we see for inflation, so our gross margin should be okay. And so the job to do then is to spend the money there wisely and we start with brand communication. And so we have a meaningful increase, but also again some really good news. I start with pet food and wilderness. We have some new advertising coming up next week. I just saw it yesterday, it's fantastic advertising. We've already gotten life protection formula back to Growth and Tasteful, so now wilderness is a job to do in Pet. If you look at what we're doing in cereal, another big global business for us, we've got great taste news coming in our cereal category. The Kelsey Brothers are highlighting that in the first quarter, but we've got more coming in the second and third quarter, bringing the Doughboy back after a few years, and private-label, they don't have a Doughboy, we do. And not only is it coming back, you've got all kinds of news to share about flakier crust and things like that. So we feel great about that. We've got -- we're sponsoring the Olympics in many countries. And then Totino's has some good marketing. So we feel good about our brand investment. But also, it comes down to the product themselves. We got really good product news, probably twice the taste news that we did a year ago when -- in our categories, taste is really king. And so whether that's flakier biscuits or cheesier Andy's Mac and Cheese, or fudgier Betty Crocker or brownies or reducing sugar in our kids cereals in K through 12. Those are all kinds of great taste news. And our new product should be up somewhere around the neighborhood of 40%, where we're investing in new product activity and really good ones on our big brand. So Fruity Cheerios in the cereal category, Mott's breakfast bars, which are off to a great start so far this year, as well as Nature Valley Lunchbox, which is allergy free that we know the moms really like, Totino's breakfast roll. So we've got really good innovation. And then there is -- there -- so those are a lot of ways that we can add value, variety packs, things like that. But also, we're increasing our couponing by about 20% or so in the beginning of the year. And we have found, because we have a lot of first-party data, which differentiates us from many other manufacturers. We can target effectively with good ROIs, and not every manufacturer can do that, but we have the ability to do that. So we are increasing our coupon spending and we have the research that tells us that it's highly effective when we do that. So we'll do that. Are there some price points we have to sharpen? There are, but there always are. We talked about in pet food, it's wet pet food. We had to get under a price clip, but we didn't have pricing options in other places. And so we feel good about the amount of value that we will create for consumers. And that really is job number one as we look at next year. Andrew Lazar: Okay. Thank you for that. And then just a quick one, Kofi, the commentary around HMM for fiscal '25 versus cost of goods inflation suggests, as Jeff highlighted, some gross margin flexibility to reinvest. Given the amount of reinvestment you're planning, not just at SG&A, but that reinvestment that goes against gross margin, can -- does your plan, I guess, anticipate that you can at least protect, if not expand, gross margins a little bit for the full year? Or could there still be some gross margin pressure for the full year, given kind of what you need to do across both sort of trade and consumer? Thank you. Kofi Bruce: Great question. Appreciate the question. Andrew. So I would say we've got enough flexibility that we would see a modest amount of gross margin expansion even with the levels of investment. And the key here is, as we look at the business, we're going to play flexibly with an eye towards investing in growth driving activity, some of which Jeff did an eloquent job of listing off. Andrew Lazar: Okay. Thank you. Kofi Bruce: You bet. Operator: Our next question comes from Bryan Spillane from Bank of America. Please go ahead. Your line is open. Bryan Spillane: Hi. Thanks, operator. Good morning, Kofi. Good morning, Jeff. I have just -- I have one question and I guess it's come in a couple of different angles to us this morning. And it really the starting point is just, have you guided low enough for fiscal '25? And I say that in the context of, there's some reinvestment, right, that or increased investment, I should say, that's implied in your plan for this year. If we look back over the last four quarters, it's -- we've been kind of waiting for the -- a term to come around the corner, not that's just General Mills, I think that's true across the whole group. And so it seems like there's just more uncertainty in planning the business this year versus most. And just given the opportunity, right, to give yourself, I guess, more cushion or actually more than that, just more potential money to spend back, why not take that opportunity now? Jeffrey Harmening: Yeah. So, Bryan, thanks for the question. The -- you talk about more volatility and uncertainty. I've said that for like you said the last five years, so I'm waiting for the year where we don't have volatility, and the market does continue to evolve, so there's no question about that. Obviously, we think we've given ourselves enough cushion here without being unduly conservative. And the market -- you're right, the market is -- it does continue to evolve. But as I said, we've got really good marketing support. New products are up. We've got really good news on our core brands. And so my expectation is that we would improve our volume performance this coming year, which was down 3% this current year. We would improve our volume performance across our different segments this year. So I know that each of our operating segments, whether it's North America, retail or foodservice or international or pet, are committed to improving our volume performance and our competitiveness. And I'm confident with the level of activity that we have and the news that we have that we can actually do that supported by gross margins that are already good, that are back to pre-pandemic levels already. And as you say, our productivity outstrips what we see as inflation. And so reinvesting some of that to make sure that we have the fuel we need to drive the growth. And we're not counting on a change in the environment necessarily to drive our growth. It really is a change in our competitiveness, and that's within our control. And so we feel good about our ability to do that. Bryan Spillane: Thanks, Jeff. Maybe just a quick follow on that is, as you've planned this year, what's your expectation on competitiveness? Meaning do you expect competitors to make similar moves? And just how are you anticipating how the competitive environment would set up this year again, given just how dynamic things are? Jeffrey Harmening: Yeah. The -- well, I certainly can't speak for my competitors, but we're all looking for more growth. And what's been interesting is that the environment has been exceptionally rational, and it's not -- it's hard for me to see that changing. And the reason I say that is because, I mean, we still have some level of inflation. I mean, we have 3% to 4% inflation. And so in that kind of environment, absent leading levels of productivity like we have, it really begs for an environment that continues to be rational. If you look at the last 12 months, promotional spending is up, frequency is up a little bit, depth of discount is up a little bit relative to the year before. But if you look before pandemic, it's kind of back to that level of promotional intensity. And as I started out, I think it was Andrew asked a question about value, there are a lot of ways to create value for consumers, and we see that I'm sure our competitors do, too. And so we'll be pulling all the levers we can to make sure that consumers know the value of our big brands. A lot of that gets back to the marketing and the product news and everything else. Bryan Spillane: Okay. Thank you. Operator: Our next question comes from Steve Powers from Deutsche Bank. Please go ahead. Your line is open. Stephen Powers: Yes. Hi. Good morning and apologies if you hear construction. There's someone who started drilling as this call started behind me. I guess the question I have to start is you talk about a roughly equal contribution from price and volume through the year at the company level, which I take to mean sort of flat to slightly positive in each case. I guess, is there any deviation from that as you think about the sequencing through the year or across the different business segments or do you expect that sort of roughly equal contribution to be representative kind of across the totality of the enterprise? Jeffrey Harmening: Yeah. The -- as we look at it -- by the way, I can't hear the drilling in the background, Steve. But as we look at it, first of all, we talk about price and volume relatively the same as price mix. And I think that mix piece is really important as we look at it. I wouldn't expect undue differential performance from any one of our segments. So it's not as to say we're looking for lots of one thing in one segment, lots of something in another segment. Really, the job to do is really volume growth across the different segments. And I think we have opportunities to improve even in foodservice, which did really well. We have opportunities to improve across the board. In terms of the sequencing. I guess my only comment would be, as you look at the first quarter of last fiscal year, which was the -- which, in terms of sales growth, was our highest sales growth quarter. You see a lot of pricing in that quarter. We're going up against that as we go into the year ahead. And so that probably has an impact on what we see on price mix in the first quarter, which, as Kofi said, along with some reinvestment, makes the comp in our first quarter the toughest of the four quarters in the year. I would expect gradual improvement as we look at our sales and profitability over the course of the year. And gradual doesn't mean it happens even every quarter, but gradually over the course of the year with Q1 being the toughest. I would say that's especially true in North America retail, where the comp from a year ago was quite good. We had a really nice Q1 in North America retail last year. Stephen Powers: Yeah. Okay. Great. Thanks. And thanks for the clarification as well. On the -- Kofi, maybe going back to where you started or Ken started the call on international, you talked about some of the challenges in Brazil and China in the moment, I guess. Any perspective on how you expect those regions, those countries, those markets to develop as the year progresses? Just kind of what you've embedded in terms of contribution in '25? Kofi Bruce: Yeah. We are -- to just pick up on kind of Jeff's last point, we are expecting volume improvement in all of our segments, but as we look at international, I think the critical thing for us is Brazil, we certainly see improvement off of this year's performance and are expecting that similarly so with China and then continued strength off of performance in EU, AU and our GEMS markets, which performed really well this past year. Stephen Powers: Thank you very much. Jeffrey Harmening: You bet. Operator: Our next question comes from Alexia Howard from Alliance Bernstein. Please go ahead. Your line is open. Connor Cerniglia: Hello. Good morning. This is Connor Cerniglia stepping in for Alexia Howard. Jeff, I'd like to ask about your ready-to-eat cereal segment. Measured channel data suggests you've experienced a bit more challenged market share dynamics at a time when promotional spend has increased at one of your competitors. Can you talk about how you think about this segment in 2025? And do you continue to see rational pricing behavior or is there a concern on this front? Thanks. And I'll pass it on. Jeffrey Harmening: Yeah, I would -- we've seen rational behavior in cereal and I would expect that to continue. Our focus is primarily on our game and our competitors' games. We -- honestly, we feel like we have the best brands in the category, and the key job for us to do in cereal is get back to playing our game. And we had -- we had good new product innovation last year. We had the top-five new products. Actually, I think some of our product innovation this year is better than we had a year ago. I referenced Fruity Cheerios in the first half. We have some good new product innovation coming in the second half, but even more important than that is a lot of the news we have coming on our core brands. And our messaging as I talked about with the Kelsey Brothers. But I also think some of our merchandising like in the back-to-school period, making sure we have a big program with Box Tops, which I'm excited about rolling out, and some taste news we have coming in the second half of the year on some big brands, which I promise the brand teams I wouldn't talk about on this call, but I'm excited about coming. And so our job really is to get back to the core growth on our big cereal brands with really good news and continue the innovation and as good as our innovation was this past year and I thought it was quite good. I think our innovation this coming year has the opportunity to be even better and early returns, would suggests that, that will be pretty good. Operator: Our next question comes from Tom Palmer from Citi. Please go ahead. Your line is open. Thomas Palmer: Good morning, and thanks for the question. I appreciate based on your earlier comments, you might not want to be overly specific here, but I guess I'll give it a try. If we exclude the inventory reductions and trade accrual, I think organic sales growth was down around 2%. Should we look at this as kind of a starting point as we enter the year? Or are there other considerations we should be thinking about as we move into the first quarter? Kofi Bruce: Yeah, I appreciate the question. So let me see if I can step back and just, if you will, give me a point of privilege here, I'll try to give you a little bit broader perspective starting at the enterprise and then drilling down to pet and North America Retail. So while we saw the slowdown in organic net sales, I think the critical thing here is we look at our measured retail sales, they're pretty consistent as we move from Q3 to Q4. So as you rightly noted, the big point on the front is three points of headwind from the comparison on the trade expense phasing from Q3 or Q4 of fiscal '23. At the enterprise level, we also saw a modest decline in retailer inventory in NAR and Pet in Q4 versus Q3, where we had a net tailwind. And then I think third and important, I'd reference again the point I made on International that, in Brazil, we had an adjustment to net sales that moved to COGS, which was worth about a point of drag on its own. So in aggregate, about five points of drag from those three factors as you peel it back. And then as you look at it on a segment basis at NAR, that trade expense comparison is about four points of drag. We also had -- we saw the retailer inventory adjustment impact NAR at about a point of tailwind flipping to or a point of tailwind in the quarter of Q4 versus a point of headwind in Q4. And then we also benefited in Q3 from some weather patterns in NAR. Then as we look at Pet, we had about two points of headwind from the trade expense comparison. We also saw retailer inventory reductions in Q4 versus Q3. And then we did have a modest amount of headwind as well from SKU losses in a few key places. So, in aggregate, that kind of gets you the picture. I think the critical thing here is the read through for you as you're thinking about how to look at the quarter. Nielsen's Q3 to Q4, roughly in line. Thomas Palmer: Got it. Okay. Thank you. And then in the presentation -- in the presentation, you listed M&A above share repo in terms of capital allocation priorities. I had kind of two pieces here. First, to what extent does the 3% share count decline in guidance assume that free cash flow in excess of the dividend is deployed for share repo versus other uses? And then second -- and look I know you've been asked plenty about this over the past year, but could you give us an update on your M&A criteria and appetite from a size standpoint? Thank you. Kofi Bruce: Sure, sure. So I think I'd first start by acknowledging that our capital allocation priorities have been pretty evergreen. So I think the first is, clearly, we want to make sure we have and allocate investment for capital spending internally for growth, that's roughly 4% is kind of the top number, and we average around 3.5% if you look at the last handful of years. Second, that we are allocating capital for increasing our dividend, roughly in line with our after tax earnings, and again we paid a dividend uninterrupted for 125-plus years. And then third, as you rightly pointed out, M&A. And again, M&A is both episodic and it's not something we built into the plan. But generally, as you look at our M&A patterns, unless we've done something big, which is pretty rare, last big acquisition was Blue Buffalo, most of the acquisitions we do are kind of in that $1 billion to $1.5 billion price range, which we can easily accommodate with a modest adjustment in our share repurchase patterns. So share repurchase remains the most discretionary element, and obviously, we will make changes to our share repurchase expectations as we identify and act on M&A opportunities. To your second point around criteria for M&A, obviously, the critical filter for us that we start first with our strategic priorities, which leads us to look at critical occasions, which would get us to priorities around breakfast and convenience -- convenient meals and snacking, as well as obviously pet food. And I think the criteria for us anchor around places where we can add value. Leverage points around our capabilities that will allow us to unlock faster growth, but also improve margins as we execute transactions. So we've been candidly working with our always on M&A capability throughout the cycle. We continue to look aggressively at opportunities. At the same time, we've remained very disciplined and have very strong filters in terms of both returns and value creation. Thomas Palmer: Right. Thank you. Operator: Our next question comes from Matt Smith from Stifel. Please go ahead. Your line is open. Matthew Smith: Hi. Good morning. I wanted to dive in a little bit on the profitability or the profit performance in the Pet segment. You were solidly in the mid-20s even with the volume decline in the quarter. I know you talked about some increased investment behind wilderness as you try to stabilize that business and get it back to growth, but is this a sustainable margin performance in the fourth quarter that we should look to as we look at fiscal 2025? Kofi Bruce: Sure. Yeah, let me start, I think we benefited this from both a more stable supply chain environment and our ability to drive higher-than-expected levels of HMM even in the face of the volume declines we saw. We continue to have and capitalize on opportunities both to internalize production that was previously external, but also to drive HMM that was frankly less available when we were struggling to supply in the supply chain disruption period. So we feel good about sort of the exit point, what I would, what I think is critical as we look at the business right now is we're very focused on driving improved volume trends. So I think profitability, very competitive, at the 20% plus level. I wouldn't expect that 24% is the level we would necessarily target. We continue to expect to be able to drive strong HMM and much like we're doing at the enterprise, I would say, our focus is going to be on reinvesting gross margin improvement back into the business to drive growth. Jeffrey Harmening: Yeah, to back up what Kofi said, I mean, a year ago, we were challenged both on our gross margin and with our sales growth and I'm really pleased with the Blue Buffalo team and the job they have done to restore the margin profile, and we've done a lot of work over the past -- over the past year to do that to get us back into a place where the margins over the last year are roughly 20% or so. And so now the job to do is to -- and that's without volume leverage, and so now the job to do is to really improve our top-line performance, and we feel good about what we've done on Life Protection Formula. We're going to double down on that. We feel good about our Tastefuls cat business, and in the last quarter, we put some more advertising on that. We've seen that business get back to growth. And so we're going to put more fuel on that. And now the job to do -- the next job to do is on wilderness. And we've been talking been talking about it for a little while, but we're putting on advertising on here in July and good levels of advertising behind really good messaging, and so that really is the job to do. And to the extent that we can get Blue Buffalo back to growth, I mean, I think the rest of it will flow quite nicely. We do have good productivity, but the real job to do is maintain these really good margins while accelerating our top-line performance. Matthew Smith: Thank you. And just a quick follow-up. You talked about some distribution losses in the Pet division, any more detail to add to that? Is that something that remains a drag as we look at fiscal '25 that perhaps keeps volume growth a little less -- a little tougher to achieve as we look into next year? Jeffrey Harmening: Yeah, we've had some distribution losses a little bit on trees and a little bit on Wet Pet Food and that was because during kind of the pandemic, there were some other competitors who couldn't supply as well that we couldn't, so we had some extra self-placement and that's rolling-off, but it's really not our big flavors or our big customers. And so even with that, we've seen improved performance on increasingly good performance on our Blue Buffalo business in aggregate if you look at movement. And so even with that, our expectation is for improved volume performance in the coming year for Blue. Matthew Smith: Thank you. I'll pass it on. Operator: Our next question comes from David Palmer from Evercore ISI. Please go ahead. Your line is open. David Palmer: Thanks. I'll just follow-up on Pet for a second. I know one of the big areas of focus was the Specialty Pet segment. Clearly, it was a drag into the fourth quarter. Do you -- you talked about in the prepared remarks about revenue growth for Pet in fiscal '25, do you also see that, that Pet Specialty segment also stabilizing and growing in fiscal '25? Jeffrey Harmening: Yeah. So I'm not going to get into specific channel by channel, but since you ask, I won't avoid it completely, David. The -- what I would say is that -- what I would see is an improvement in that channel. We've actually seen an improvement in the channel. Now the job for us to do is improvement in our own performance, and it really is about wilderness and about getting our sizing right and about working with the retailers there to improve the performance of wilderness. By the way, they're in on it too. We all want to improve the performance of wilderness, and so we're all rolling in the same direction. And so my expectation would be improved performance for us in the Pet Specialty channel. We'll see what that yields over time. But I feel as if we have the right actions in place to improve our performance in that channel, particularly with wilderness, which is the most important thing to improve. David Palmer: And just a question on the Baking segment, that seemed to be an area that did very well during COVID. You cited it as one of the areas that was most declining in this quarter. Are you seeing -- I just wanted to get your pulse on that segment and be consumer behaviors around that and make sure that it's not going to be an on-going drag for you in fiscal '25. How are you feeling about that segment and the consumer behaviors around baking and the At-Home occasions that would drive that? I know it's a high-margin segment for you, and I'll pass it on. Thanks. Jeffrey Harmening: Yeah. So let me start with At-Home occasions. At-Home occasions are actually quite high, I mean, about 86% to 87% of food is now eaten at home, and given the challenges consumers are facing with inflation, we would expect that to continue. So I don't see a drag on category performance for At-Home eating occasions. So that would be the first point. The second is that the category itself in terms of volume has hung in there pretty well. It's our share position, particularly as we look at Pillsbury that has been the challenge and after many years of remarkable growth, this past year, we saw a return of private-label to shelves some smaller competitors, but mainly private-label. And so this past year, I think is going to be an anomaly. And I think the key for us is really not a change in the environment. The key for us is our change in level of activity. And I'll tell you our plans in Doughboy are quite good. As I talked about, we're bringing the Doughboy back, but also we've got product improvements, taste improvements on things like biscuits, which I think will serve us very well. We have variety packs coming in cookie dough with brands like Reese's and Oreo and Monster Cookies and so we have a really good plan and really good news to share on our Pillsbury business this year. And so it's really within our hands to get us back to growth on Pillsbury, and I feel good about our plans there. David Palmer: Thanks for that. Operator: Our next question comes from Robert Moskow from TD Cowen. Please go ahead. Your line is open. Robert Moskow: Hey, thanks for the question. Good morning, Jeff. Jeffrey Harmening: Good morning. Robert Moskow: I wanted to know, you and a lot of your peers have shifted the emphasis more to volume, and I'm not denying the importance of it right now. But it is -- it just sounds different than the strategy that a lot of CPG companies have used over the years to create value through premiumization, convenience that's been a way to improve margins and improve mix historically. Can you do both of these things at the same time? It seems like there's a lot of discussion on volume today. And I'm wondering if there's still -- if the consumer can still absorb or accept more premium offerings in this environment? Jeffrey Harmening: Yeah, Rob, I don't see it as a trade-off between volume and premiumization. I think it's an and, I'll take our Blue Buffalo, which is a premium offering, but Life Protection Formula has done particularly well behind really good marketing, and so really -- that's one when I talked about value earlier, getting back to really good marketing and really good messaging on our big brands is really crucial. So I don't see a trade-off between getting back to volume and premiumization in the categories. I think it's an and. And Pillsbury is another example where it's a premium offering in the category and we've got really good marketing against it. And I think the reason you hear us talking about volume is obviously our volumes were down versus a year ago, and so that's really the job for us to do is to get back to that. But -- and I think you're right to ask, but that doesn't mean that we can't premiumize. So those things are not mutually exclusive. And in fact, I think in many cases, they go together. The key is to make sure that the value that we offer as we think about it is commensurate with the brand itself. And so that's why you heard me talking a lot about the news we have on our big core billion brands because that really is going to be the key to our success. And we talk about value, a lot of people immediately go to price and that certainly is a component, but it's not the component. I mean, if you think about it and when consumers feel pinched, one of the most important things they have to do is feed their families and what they can't afford is waste and the family has to really want it, and so you hear us talking a lot of case, news and things like that in this environment. And so I appreciate the question. I think it's a really good one you hear us talking about volume because, obviously, if that's the most important job to do, but it is not the opposite of increasing premiumization at the same time. Robert Moskow: Great. Thank you. Operator: Our last question today will come from Chris Carey from Wells Fargo. Please go ahead. Your line is open. Christopher Carey: Hey, thank you. I'll just wrap it up with a couple of follow-ups. So number one, Kofi, on gross margins, you said expansion for the full year. In the prepared remarks, you did highlight, however, that gross margin compares harder in Q1, you'll be doing more couponing in Q1, should we expect gross margins to be down year-over-year to start the fiscal year, then improve as couponing becomes more balanced and comps get easier. Apologies if I missed that, but that would be number one. And then second, just the recurring debate throughout the Q&A this morning has been the sales reaccelerate -- or acceleration implied in the outlook. If you just think about SRM, couponing, and perhaps other items, how would you frame the relative contribution of these items to the acceleration that you're expecting in your outlook for the year? So thanks so much on those two. Kofi Bruce: Okay. Well, let me start. I would just say on Q1, I'm not prepared to get too much more detail than I already have been, which is -- effectively we'd expect the comparison on sales. Jeff mentioned the price mix comparison component of that obviously, and then profit compared, operating profit compared to the same quarter prior year will be a net headwind. So we do expect the complexion of our Q1 to be lower than the subsequent quarters. I'm not going to get too much more detail below that. Obviously, I think implied in our guidance and our expectations is that we're going to use all the levers of our SRM toolkit. So to the point, there's always a lot of focus on the price component of that, and certainly, that is important in this environment, but I think there -- we are using everything from trade optimization to mix will be front and center and focus as we're pulling the levers of SRM. Obviously, as we've worked through this year, it's been clear prices and that price mix has been less of a driver of sales as we've lapped all the pricing from the prior year. But we would expect to continue to use SRM toolkit in its full totality next year. I can't get too much more specific about the components or the complexion at this point. Christopher Carey: Okay. Thank you. Jeff Siemon: Okay. I think we'll go ahead and wrap it up there. I appreciate everyone's good questions and time and attention. And as always, we're available for follow-ups throughout the day if you have more questions that you need to get us. So I appreciate the time today and we look forward to catching up soon. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
General Mills, Inc. (NYSE:GIS) Q2 2025 Earnings Overview
- Earnings per share (EPS) of $1.40, surpassing estimates and indicating a 12% year-over-year increase.
- Revenue reached approximately $5.24 billion, exceeding expectations.
- Financial metrics reveal a price-to-earnings (P/E) ratio of 13.93 and a debt-to-equity ratio of 1.58, showcasing the company's robust financial health.
General Mills, Inc. (NYSE:GIS) is a leading global food company known for its wide range of products, including cereals, snacks, and pet foods. The company operates in a competitive market alongside other major players like Kellogg's and Nestlé. On December 18, 2024, General Mills reported its Q2 2025 earnings, showcasing strong financial performance.
General Mills reported earnings per share (EPS) of $1.40, surpassing the estimated $1.22. This represents a 12% increase year over year on a constant currency basis, as highlighted by Zacks. The company's revenue also exceeded expectations, reaching approximately $5.24 billion compared to the estimated $5.14 billion. This performance underscores General Mills' robust financial health.
The earnings call featured key executives, including CEO Jeff Harmening and CFO Kofi Bruce, who provided insights into the company's strategic direction. Analysts from major financial institutions attended the call, reflecting the market's interest in General Mills' performance. The call was conducted in a listen-only mode, allowing participants to focus on the company's financial results and future plans.
General Mills' financial metrics provide further insight into its market valuation. The company has a price-to-earnings (P/E) ratio of approximately 13.93, indicating how the market values its earnings. Its price-to-sales ratio is about 1.79, reflecting the market's valuation of its revenue. The enterprise value to sales ratio stands at around 2.40, suggesting how the company's total value compares to its sales.
The company's financial leverage is highlighted by a debt-to-equity ratio of approximately 1.58. This ratio indicates the extent to which General Mills is financing its operations through debt. Additionally, the current ratio of around 0.92 suggests the company's ability to cover its short-term liabilities with its short-term assets. These metrics provide a comprehensive view of General Mills' financial position.
General Mills Beats Q2 Expectations but Lowers Full-Year Profit Forecast
General Mills (NYSE:GIS) delivered stronger-than-expected second-quarter results, with adjusted earnings per share of $1.40 surpassing analyst estimates of $1.22. Revenue rose 2% year-over-year to $5.2 billion, beating the forecasted $5.14 billion. However, despite the solid quarterly performance, shares dipped more than 4% as the company reduced its full-year profit outlook.
The company now anticipates adjusted operating profit to decline 2–4% in constant currency, a revision from its prior guidance of flat to down 2%. The adjustment reflected rising promotional investments and additional challenges expected in the second half of the fiscal year.
While the company achieved progress in key areas, such as accelerating volume growth and returning its North America Pet business to positive growth, the outlook for organic net sales growth in fiscal 2025 narrowed to the lower end of the 0–1% range. Adjusted earnings per share are now projected to decline 1–3% in constant currency, down from the earlier guidance of -1% to +1%.
Second-quarter results were bolstered by temporary factors, including increased retailer inventories, which are expected to reverse in the latter half of the year. Performance varied across segments, with flat sales in North America Retail and a 5% sales increase in the North America Pet business.
Despite progress in several areas, General Mills faces headwinds in maintaining momentum, with the updated guidance reflecting the challenges ahead.
General Mills, Inc. (NYSE:GIS) Quarterly Earnings Insight
- Analysts estimate an EPS of $1.22 and projected revenue of $5.14 billion for the upcoming quarterly earnings.
- There is a keen interest in General Mills' financial performance, with a focus on key metrics beyond just revenue and profit figures.
- Financial ratios such as a P/E ratio of approximately 15.56 and a price-to-sales ratio of about 1.87 provide insights into the company's market valuation.
General Mills, Inc. (NYSE:GIS) is a leading global food company known for its wide range of products, including cereals, snacks, and pet foods. As a major player in the consumer goods sector, it competes with other giants like Kellogg's and Nestlé. The company is set to release its quarterly earnings on December 18, 2024, with analysts estimating an EPS of $1.22 and projected revenue of $5.14 billion.
As highlighted by Benzinga, analysts have been revising their forecasts ahead of the earnings call, indicating a keen interest in General Mills' financial performance. The focus is not just on the typical revenue and profit figures but also on key metrics that could provide deeper insights into the company's operations. This anticipation suggests that the upcoming earnings report could significantly impact the stock's price.
Despite the projected revenue increase, analysts expect a decline in earnings for the quarter ending November 2024. This expectation is crucial for understanding the company's earnings outlook. If General Mills surpasses these estimates, the stock might see an upward movement. Conversely, failing to meet expectations could lead to a decline, making the earnings call a pivotal event for investors.
General Mills' financial ratios provide further context for its valuation. With a P/E ratio of approximately 15.56, investors are willing to pay $15.56 for each dollar of earnings. The price-to-sales ratio of about 1.87 indicates that investors pay $1.87 for every dollar of sales. These metrics help investors gauge the company's market value relative to its earnings and sales.
The company's enterprise value to operating cash flow ratio is around 14.05, offering insight into its valuation compared to cash flow. An earnings yield of about 6.43% provides a perspective on shareholder returns. Additionally, a debt-to-equity ratio of approximately 1.44 highlights the proportion of debt in financing assets. The current ratio of around 0.66 suggests the company's ability to cover short-term liabilities with short-term assets.
General Mills (NYSE:GIS) Price Target Update and Financial Outlook
- Bryan Spillane of Bank of America Securities updates General Mills (NYSE:GIS) price target to $78, indicating a potential increase of about 4.36% from its current price.
- The sale of General Mills' North American Yogurt business is part of a broader strategy to streamline operations, despite causing a minor stock price drop of 0.2%.
- Wall Street forecasts a downturn in performance for the quarter ended August 2024, with earnings per share expected to decrease by 3.7% year over year to $1.05, and revenue projected to fall by 2.5% to $4.78 billion.
Bryan Spillane of Bank of America Securities recently updated the price target for General Mills (NYSE:GIS) to $78, suggesting a potential increase of about 4.36% from its current price of $74.74. This adjustment reflects a positive outlook on the company's financial future. General Mills, a leading global food company, is known for its wide range of products, including cereals, snacks, and yogurt. The company operates in a competitive industry, facing off against other food giants like Kellogg's and PepsiCo.
The anticipation around General Mills' first-quarter earnings is high, especially considering the company's strategic moves and the broader consumer landscape. Analysts are keen to see how General Mills' recent sale of its North American Yogurt business to Lactalis and Sodiaal, announced on September 12, will impact its financials. This sale, which led to a minor drop in stock price by 0.2%, closing at $73.01, is part of the company's broader strategy to streamline its operations and focus on its core brands.
Wall Street forecasts for the quarter ended August 2024 suggest a slight downturn in performance compared to the previous year, with earnings per share expected to decrease by 3.7% year over year to $1.05, and revenue projected to fall by 2.5% to $4.78 billion. These projections come amidst a minor adjustment in the consensus estimate for the company's earnings per share, which saw a downward revision of 0.1% over the last 30 days. This adjustment reflects the analysts' reevaluation of their initial forecasts, indicating a cautious stance on the company's short-term financial outlook.
The significance of these earnings estimate revisions cannot be understated, as they often influence investor reactions to a company's stock. Historical data shows a strong correlation between the direction of earnings estimate revisions and the stock's short-term price movements. As General Mills prepares to release its first-quarter earnings, investors and analysts alike will be closely watching how these factors play out in the company's financial performance.
Ahead of the earnings call, the stock has seen slight fluctuations, trading at $74.625, with a minor change of -0.005%. The stock's performance over the past year, ranging from a low of $60.33 to a high of $75.9, alongside a market capitalization of approximately $41.54 billion, underscores the company's significant presence in the market. With these financial dynamics at play, the upcoming earnings report will be crucial in determining General Mills' trajectory in the competitive food industry landscape.
General Mills, Inc. (NYSE:GIS) Stock Target Price Fluctuations and Analyst Sentiment
- Initial average target price was set at $72.75, later adjusted to $69.00, and recently increased to $71.50.
- Credit Suisse analyst Robert Moskow anticipates General Mills to surpass earnings expectations, setting a specific price target of $68.
- The adjustments in target prices reflect a cautiously optimistic outlook on General Mills' financial health and growth prospects.
General Mills, Inc. (NYSE:GIS), a prominent player in the global food industry, has been navigating the complex landscape of consumer preferences and market dynamics with its diverse product range. Known for its iconic brands like Cheerios and Häagen-Dazs, General Mills has established a strong presence in various segments, including retail and pet food. The company's ability to adapt and innovate has been crucial in maintaining its competitive edge against rivals in the food sector.
The stock target price for General Mills has experienced notable changes over the past year, reflecting the evolving analyst sentiment towards the company. Initially, the average target price was set at $72.75, showcasing a positive outlook. However, this figure was adjusted to $69.00 in the last quarter, indicating a tempered expectation. Recently, there has been a slight uptick to $71.50, suggesting a resurgence of optimism among analysts. This fluctuation in target prices underscores the dynamic nature of market perceptions and the impact of various factors on investor confidence.
Credit Suisse analyst Robert Moskow's recent analysis sheds light on the reasons behind the renewed confidence in General Mills. Moskow anticipates that the company will surpass earnings expectations in its upcoming report, driven by a favorable combination of factors that historically lead to earnings beats. This optimism is further supported by a specific price target of $68 set by Credit Suisse, indicating a belief in the company's strong performance potential. Such analyses play a significant role in shaping the consensus target price and reflect the underlying confidence in General Mills' strategic direction and market positioning.
The anticipation of General Mills exceeding earnings expectations is a testament to the company's strategic initiatives and its ability to navigate market challenges. The analysis by Credit Suisse highlights the importance of understanding the factors that contribute to financial performance, including product mix and market trends. As General Mills prepares for its earnings announcement, investors and stakeholders are closely watching, with the recent adjustments in target prices indicating a cautiously optimistic outlook on the company's financial health and growth prospects.
While the consensus target price for General Mills has seen adjustments over the past year, the underlying factors contributing to these changes are crucial for investors to consider. The company's broad portfolio, strategic market responses, and the potential to surpass earnings expectations are key drivers of analyst sentiment. As General Mills continues to adapt to consumer preferences and market dynamics, the evolving target prices reflect the ongoing assessment of its financial outlook and investment potential.
General Mills Shares Fall on Outlook Cut
General Mills (NYSE:GIS) experienced a more than 2% decline in its shares intra-day today after the company revised its full-year forecast downwards.
In its fiscal second quarter, General Mills reported an adjusted earnings per share (EPS) of $1.25, an improvement from $1.10 in the same period last year and higher than the anticipated $1.15. However, net sales decreased by 1.6% year-over-year to $5.14 billion, falling short of the expected $5.35 billion.
The company now anticipates a slower volume recovery in fiscal 2024. This updated outlook is based on a more conservative consumer economic forecast and a quicker return to normal competitive availability on store shelves.
Consequently, organic net sales projections have been adjusted to a range between -1% and flat, a significant change from the previously estimated growth of 3-4%. This adjustment reflects the expected slower volume recovery in the upcoming fiscal year.
Additionally, General Mills now forecasts adjusted operating profit and adjusted diluted EPS to grow by 4-5% in constant currency, a slight decrease from the previously projected growth range of 4-6% in constant currency.
General Mills Reports Better Than Expected Q1 Earnings Results
General Mills (NYSE:GIS) reported a decline in adjusted earnings for the first quarter, but it still exceeded expectations. This achievement can be attributed to the stabilization of supply chains and the resilience of consumers in the face of inflationary pressures.
In the first quarter, General Mills reported earnings per share (EPS) of $1.09, surpassing the analyst estimate of $1.08. The company's revenue for the quarter reached $4.9 billion, slightly ahead of the Street estimate of $4.89 billion.
Furthermore, General Mills has reaffirmed its outlook for the fiscal year 2024, expressing confidence in driving organic net sales growth through robust marketing, innovation, in-store support, and effective pricing strategies. The company also expects a moderation in the rate of input cost inflation, along with a reduction in disruptions within its supply chains.
General Mills anticipates organic net sales growth of 3 to 4 percent and projects a 4 to 6 percent increase in both adjusted operating profit and adjusted diluted EPS in constant currency.
