General Mills — Fiscal 2027 First Quarter Earnings Summary

Financial Performance

• Net sales were $4.4 billion, down 3 percent year-over-year, driven by the U.S. yogurt divestiture; organic net sales were flat.
• Operating profit was $634 million, down 63 percent, primarily due to a $1 billion gain on the yogurt divestiture recorded in the prior year; adjusted operating profit was down 11 percent in constant currency.
• Operating profit margin was 14.4 percent, down 2,380 basis points; adjusted operating profit margin was 14.4 percent, down 130 basis points.
• Gross margin was unchanged at 33.9 percent; adjusted gross margin was down 90 basis points to 33.3 percent.
• Diluted earnings per share (EPS) were $0.74, down 67 percent; adjusted diluted EPS was $0.75, down 13 percent in constant currency.
• Net earnings attributable to General Mills were $397 million, down 67 percent.
• Cash provided by operating activities was $298 million, down from $397 million in the prior year, driven by lower accrued federal income taxes payable.
• Capital investments were $90 million, down from $110 million in the prior year.
• Dividends paid were $330 million, compared to $331 million in the prior year.
• The company did not repurchase shares in the first quarter, compared to $500 million in share repurchases in the prior year.
• Average diluted shares outstanding decreased 1 percent to 538 million.
• Net interest expense was $142 million, up from $133 million in the prior year, driven by higher interest rates.
• The effective tax rate was 24.5 percent, compared to 25.6 percent in the prior year; the adjusted effective tax rate was 23.4 percent.

Guidance and Future Outlook

• The company reaffirmed its full-year fiscal 2027 outlook.
• Fiscal 2027 organic net sales are expected to range between down 1.5 percent and up 0.5 percent.
• Fiscal 2027 adjusted operating profit is expected to be down 13 percent to down 8 percent in constant currency.
• Fiscal 2027 adjusted diluted earnings are expected to be between $3.00 and $3.20 per share.
• Fiscal 2027 free cash flow conversion is expected to be approximately 95 percent of adjusted after-tax earnings.
• The company expects to generate at least $750 million in savings from its Holistic Margin Management program and global transformation initiative.
• Headwinds of approximately 9 points on operating profit and 11 points on EPS are expected from lapping the 53rd week in fiscal 2026, normalizing corporate incentive expense, and the impact of fiscal 2026 divestitures.
• The net impact of divestitures, foreign currency exchange, and the 53rd week is expected to reduce full-year reported net sales growth by approximately 4 percent.
• Foreign currency exchange is not expected to have a material impact on adjusted operating profit growth or adjusted diluted EPS growth.
• Restructuring and transformation charges and transaction costs related to previously announced actions are expected to total approximately $80 million to $85 million.

Business Segments and Product Lines

• North America Retail: Net sales were down 7 percent to $2.4 billion, including a 4-point headwind from the U.S. yogurt divestiture; organic net sales were down 3 percent. Operating profit was down 15 percent to $479 million.
• North America Pet: Net sales were flat at $613 million; organic net sales were flat, driven by an extra month of results for the Whitebridge Pet Brands business. Operating profit was down 12 percent to $100 million.
• North America Foodservice: Net sales were up 1 percent to $523 million, including a 2-point headwind from the U.S. yogurt divestiture; organic net sales were up 4 percent. Operating profit was up 12 percent to $79 million.
• International: Net sales increased 4 percent to $794 million, including a 1-point benefit from foreign currency exchange; organic net sales were up 4 percent. Operating profit was up 14 percent to $75 million.
• Joint Ventures: Cereal Partners Worldwide (CPW) constant-currency net sales were down 4 percent; Häagen-Dazs Japan (HDJ) constant-currency net sales were down 3 percent. Combined after-tax earnings from joint ventures totaled $19 million.
• The Brazil divestiture was completed on September 2, 2026, subsequent to the end of the first quarter.

Market and Competitive Landscape

• The company expects category growth to be consistent with recent trends and below its long-term historical growth rate due to a challenging consumer backdrop.
• North America Retail dollar share trends strengthened in the majority of priority categories, with a 2-point sequential improvement in retail sales growth.
• North America Pet organic net sales outpaced all-channel retail sales growth by approximately 1 point.
• North America Foodservice held or gained market share across 100 percent of its priority businesses.
• International growth was driven by distributor markets, India, and China.

Risks and Challenges

• Risks include imposed and threatened tariffs, supply chain disruptions, competitive dynamics, economic conditions (inflation, interest rates, tax rates), and consumer behavior changes (including weight loss trends and health perceptions).
• Potential impacts from product quality and safety issues, regulatory changes, and litigation.
• Risks related to the effectiveness of restructuring, transformation, and cost-saving initiatives, as well as volatility in commodity prices and currency rates.
• Risks associated with foreign economic conditions, political unrest, and information technology system failures.

Management Commentary and Tone

• CEO Jeff Harmening described the start of fiscal 2027 as "encouraging," citing improved topline performance through product innovation and renovation.
• Management emphasized executing with discipline in a volatile environment, delivering industry-leading cost savings through the Holistic Margin Management program and global Transformation initiative.
• The company remains confident in its ability to deliver fiscal 2027 guidance.
• Strategic focus is shifting to product innovation centered on benefits like protein, fiber, bold flavors, and pet humanization to restore profitable organic net sales growth.

Other Key Points

• The U.S. yogurt business was divested in the first quarter of fiscal 2026, resulting in a $1.05 billion gain in the prior year that impacts comparability.
• A $24 million non-cash pre-tax valuation loss was recorded in the first quarter of fiscal 2027 related to the planned divestiture of the Brazil business.
• Unallocated corporate items totaled $78 million net expense, down from $126 million in the prior year.
• Restructuring, transformation, impairment, and other exit costs totaled $21 million in the first quarter, up from $16 million in the prior year.
• The company recorded $30 million net decrease in expense related to mark-to-market valuation of commodity positions, compared to an $8 million net increase in the prior year.
• Transaction costs totaled $4 million, primarily related to the Brazil business sale agreement, compared to $12 million in the prior year related to the U.S. yogurt sale.
• The company is investing in its brands to restore profitable organic net sales growth using the "Remarkable Experience Framework."