General Mills Reports Fiscal 2025 Second-Quarter Results and Updates Full-Year Outlook

• Net sales of $5.2 billion were up 2 percent; organic net sales¹ increased 1 percent
• Operating profit of $1.1 billion was up 33 percent; adjusted operating profit of $1.1 billion increased 7 percent in constant currency
• Diluted earnings per share (EPS) of $1.42 was up 39 percent; adjusted diluted EPS of $1.40 increased 12 percent in constant currency
• Second-quarter results included certain timing benefits that are expected to reverse in the second half
• Company updates full-year fiscal 2025 outlook to reflect increased investment to fund improved volume and market share trends

¹ Please see Note 7 to the Consolidated Financial Statements below for reconciliation of this and other non-GAAP measures used in this release.

General Mills, Inc. (NYSE:GIS) today reported results for its fiscal 2025 second quarter.

"We made important progress accelerating our volume growth and market share trends in the first half of the year, including returning our North America Pet business to growth," said General Mills Chairman and Chief Executive Officer Jeff Harmening. "To achieve and build on these enterprise-wide gains, we've made incremental investments to bring consumers greater value. While these investments lower our profit outlook for fiscal 2025, they better position General Mills for sustainable growth in fiscal 2026 and beyond. Amidst a dynamic external environment, I'm not only confident in our plans, but especially our teams, who are operating with agility and doing what's right for our consumers."

Guided by its purpose to make food the world loves, General Mills is executing its Accelerate strategy to drive sustainable, profitable growth and top-tier shareholder returns over the long term. The strategy focuses on four pillars to create competitive advantages and win: boldly building brands, relentlessly innovating, unleashing scale, and standing for good. The company is prioritizing its core markets, global platforms, and local gem brands that have the best prospects for profitable growth and is committed to reshaping its portfolio with strategic acquisitions and divestitures to further enhance its growth profile.

Second Quarter Results Summary

• Results in the quarter were impacted by certain favorable timing items that are expected to reverse in the second half of fiscal 2025. These include an increase in retailer inventory in North America Retail due in part to the Thanksgiving holiday shifting from the final week of the second quarter of fiscal 2024 to the first week of the third quarter of fiscal 2025, as well as favorable trade and other expense timing. These items represented approximately a 1.5-point benefit to net sales and a 6-point benefit to operating profit in the quarter.
• Net sales increased 2 percent to $5.2 billion, driven by higher pound volume partially offset by unfavorable net price realization and mix. Organic net sales were up 1 percent.
• Gross margin was up 250 basis points to 36.9 percent of net sales, driven primarily by Holistic Margin Management (HMM) cost savings and favorable mark-to-market effects, partially offset by input cost inflation. Adjusted gross margin was up 130 basis points to 36.3 percent of net sales, driven primarily by HMM cost savings, partially offset by input cost inflation and unfavorable net price realization and mix.
• Operating profit of $1.1 billion was up 33 percent, driven primarily by higher gross profit dollars and a goodwill impairment charge a year ago, partially offset by higher selling, general, and administrative (SG&A) expenses. Operating profit margin of 20.6 percent was up 480 basis points. Adjusted operating profit of $1.1 billion increased 7 percent in constant currency, driven by higher adjusted gross profit dollars, partially offset by higher adjusted SG&A expenses. Adjusted operating profit margin was up 100 basis points to 20.3 percent.
• Net earnings attributable to General Mills of $796 million were up 34 percent and diluted EPS was up 39 percent to $1.42, driven primarily by higher operating profit and lower net shares outstanding, partially offset by a higher effective tax rate. Adjusted diluted EPS of $1.40 was up 12 percent in constant currency, driven primarily by higher adjusted operating profit, lower net shares outstanding, and a lower adjusted effective tax rate.

Six Month Results Summary

• Net sales of $10.1 billion essentially matched year-ago results, with higher pound volume offset by unfavorable net price realization and mix. Organic net sales were also essentially in line with year-ago results.
• Gross margin and adjusted gross margin were each up 70 basis points to 35.9 percent of net sales, driven primarily by HMM cost savings, partially offset by input cost inflation.
• Operating profit of $1.9 billion was up 10 percent, driven primarily by a goodwill impairment charge a year ago and higher gross profit dollars this year, partially offset by higher SG&A expenses. Operating profit margin of 18.9 percent was up 160 basis points. Adjusted operating profit of $1.9 billion increased 2 percent in constant currency, driven by higher adjusted gross profit dollars, partially offset by higher adjusted SG&A expenses. Adjusted operating profit margin was up 30 basis points to 19.1 percent.
• Net earnings attributable to General Mills of $1.4 billion were up 8 percent and diluted EPS was up 13 percent to $2.45, driven primarily by higher operating profit and lower net shares outstanding, partially offset by a higher effective tax rate. Adjusted diluted EPS of $2.47 was up 6 percent in constant currency, driven primarily by higher adjusted operating profit and lower net shares outstanding.

Operating Segment Results

• The acquisition of the Edgard & Cooper pet food business in the fourth quarter of fiscal 2024 impacted the comparability of second-quarter and year-to-date International segment operating results between fiscal 2024 and fiscal 2025.
• Tables may not foot due to rounding.

North America Retail Segment

Second-quarter net sales for General Mills' North America Retail segment of $3.3 billion essentially matched year-ago results, with favorable net price realization and mix offset by lower pound volume. Organic net sales were up 1 percent. Net sales outpaced Nielsen-measured retail sales by approximately 2 points in the quarter, reflecting an increase in retailer inventory due in part to the impact of the later Thanksgiving holiday in fiscal 2025, as well as stronger growth in non-measured channels. Net sales were up mid-single digits for the U.S. Morning Foods operating unit and up low-single digits for U.S. Snacks. Net sales were down low-single digits for U.S. Meals & Baking Solutions and were down mid-single digits for Canada in constant currency. Segment operating profit of $862 million essentially matched year-ago results as reported and in constant currency, driven primarily by HMM cost savings and favorable net price realization and mix, offset by input cost inflation, higher other supply chain costs, and lower volume.

Through six months, North America Retail segment net sales were down 1 percent to $6.3 billion. Organic net sales essentially matched year-ago levels. Segment operating profit of $1.6 billion was down 3 percent as reported and in constant currency, driven primarily by input cost inflation, higher other supply chain costs, and lower volume, partially offset by HMM cost savings and favorable net price realization and mix.

North America Pet Segment

Second-quarter net sales for the North America Pet segment were up 5 percent to $596 million, driven by higher pound volume, partially offset by unfavorable net price realization and mix. Organic net sales were also up 5 percent. Net sales performance outpaced all-channel retail sales results by roughly 4 points, reflecting a rebuild of retailer inventory after significant prior-year reductions. Net sales in the quarter were up high-single digits for dry pet food, up mid-single digits for wet pet food, and up low-single digits for pet treats. Segment operating profit of $139 million was up 36 percent, driven primarily by HMM cost savings, higher volume, and lower other supply chain costs, partially offset by unfavorable net price realization and mix and higher SG&A expenses including increased media investment.

Through six months, North America Pet segment net sales were up 2 percent to $1.2 billion. Organic net sales were also up 2 percent. Segment operating profit was up 21 percent to $259 million, driven primarily by HMM cost savings, lower other supply chain costs, and higher volume, partially offset by unfavorable net price realization and mix, higher SG&A expenses including increased media investment, and input cost inflation.

North America Foodservice Segment

Second-quarter net sales for the North America Foodservice segment were up 8 percent to $630 million. Organic net sales were also up 8 percent, with growth on breads, cereal, and frozen meals. Segment operating profit increased 24 percent to $118 million, driven primarily by favorable net price realization and mix.

Through six months, North America Foodservice net sales increased 4 percent to $1.2 billion. Organic net sales were also up 4 percent. Segment operating profit was up 23 percent to $190 million, driven primarily by favorable net price realization and mix.

International Segment

Second-quarter net sales for the International segment increased 1 percent to $691 million, including a 4-point benefit from the Edgard & Cooper acquisition. Organic net sales were down 3 percent, driven primarily by declines in China and Brazil, partially offset by growth in distributor markets and Europe & Australia. Segment operating profit totaled $24 million versus $35 million a year ago, driven primarily by unfavorable net price realization and mix and higher SG&A expenses, partially offset by HMM cost savings.

Through six months, International net sales increased 1 percent to $1.4 billion, including a 3-point benefit from the Edgard & Cooper acquisition. Organic net sales were down 2 percent. Segment operating profit totaled $45 million versus $85 million a year ago, driven primarily by unfavorable net price realization and mix and input cost inflation, partially offset by HMM cost savings and higher volume.

Joint Venture Summary

Second-quarter constant-currency net sales increased 2 percent for Cereal Partners Worldwide (CPW) and were up 1 percent for Häagen-Dazs Japan (HDJ). Combined after-tax earnings from joint ventures were up 24 percent to $30 million, driven primarily by lower input costs and favorable net price realization and mix at CPW, partially offset by higher SG&A expenses and lower volume at CPW and higher input costs at HDJ.

Other Income Statement Items

Second-quarter unallocated corporate items totaled $65 million net expense in fiscal 2025 compared to $157 million net expense a year ago. Excluding mark-to-market valuation effects and other items affecting comparability, unallocated corporate items totaled $80 million net expense this year compared to $103 million net expense a year ago.

Restructuring, impairment, and other exit costs totaled $1 million in the second quarter compared to $124 million a year ago (please see Note 3 below for more information on these charges).

Net interest expense totaled $125 million in the second quarter compared to $118 million a year ago, driven primarily by higher average long-term debt levels. The effective tax rate in the quarter was 20.1 percent compared to 19.0 percent last year (please see Note 6 below for more information on our effective tax rate). The second-quarter adjusted effective tax rate was 20.1 percent compared to 20.8 percent a year ago, driven primarily by favorable earnings mix by jurisdiction in the second quarter of fiscal 2025.

Cash Flow Generation and Cash Returns

Cash provided by operating activities totaled $1.8 billion through six months of fiscal 2025 and was up 19 percent from a year ago, driven primarily by a change in accounts payable, partially offset by changes in inventory and other current assets. Capital investments totaled $301 million compared to $294 million a year ago. Dividends paid of $676 million were down 2 percent, reflecting lower average shares outstanding. General Mills repurchased approximately 9 million shares of common stock through six months of fiscal 2025 for a total of $600 million compared to $1.3 billion in share repurchases a year ago. Average diluted shares outstanding in the first half decreased 4 percent to 562 million.

Fiscal 2025 Outlook

Amid an uncertain macroeconomic backdrop for consumers across its core markets, General Mills is focused on delivering remarkable experiences across its leading food brands, resulting in sustainable improvement in volume growth and market share trends over time. Through the first six months of fiscal 2025, General Mills generated 1 percent growth in organic pound volume, which represented a 4-point improvement versus its fiscal 2024 performance. Additionally, it grew or maintained dollar market share in 38 percent of its priority businesses in the second quarter, which represented a significant improvement from fiscal 2024 levels. To support these improvements, the company has added targeted promotional investment – above its original plans – in certain priority categories to deliver greater value for consumers, while continuing to invest in brand building above fiscal 2024 levels.

Based on the above assumptions, the company updated its full-year fiscal 2025 financial targets²:

• Organic net sales are still expected to range between flat and up 1 percent, with the company now targeting the lower end of the range due to increased promotional investment. Organic net sales results in the second half are expected to include a 1-point headwind from the reversal of timing-related benefits in the second quarter.
• Adjusted operating profit is now expected to range between down 4 percent and down 2 percent in constant currency, compared to the previous range of between down 2 percent and flat in constant currency, reflecting higher investment levels. Adjusted operating profit results in the second half are expected to include a 3-point headwind from the reversal of timing-related benefits in the second quarter, a 3-point headwind from incremental growth investments, and a 2-point headwind from a partial reset of incentive compensation.
• Adjusted diluted EPS is now expected to range between down 3 percent and down 1 percent in constant currency, compared to the previous range of between down 1 percent and up 1 percent in constant currency.
• Free cash flow conversion is still expected to be at least 95 percent of adjusted after-tax earnings.
• These targets do not reflect an impact from the proposed North American Yogurt divestitures nor the acquisition of Whitebridge Pet Brands' North American portfolio. The company expects to incorporate these transactions into its outlook after they are closed.

² Financial targets are provided on a non-GAAP basis because certain information necessary to calculate comparable GAAP measures is not available. Please see Note 7 to the Consolidated Financial Statements below for discussion of the unavailable information.

General Mills will issue pre-recorded management remarks today, December 18, 2024, at approximately 6:30 a.m. Central time (7:30 a.m. Eastern time) and will hold a live, webcasted question and answer session beginning at 8:00 a.m. Central time (9:00 a.m. Eastern time). The pre-recorded remarks and the webcast will be made available at www.generalmills.com/investors.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on our current expectations and assumptions. These forward-looking statements, including the statements under the caption "Fiscal 2025 Outlook," and statements made by Mr. Harmening, are subject to certain risks and uncertainties that could cause actual results to differ materially from the potential results discussed in the forward-looking statements. In particular, our predictions about future net sales and earnings could be affected by a variety of factors, including: disruptions or inefficiencies in the supply chain; competitive dynamics in the consumer foods industry and the markets for our products, including new product introductions, advertising activities, pricing actions, and promotional activities of our competitors; economic conditions, including changes in inflation rates, interest rates, tax rates, or the availability of capital; product development and innovation; consumer acceptance of new products and product improvements; consumer reaction to pricing actions and changes in promotion levels; acquisitions or dispositions of businesses or assets; changes in capital structure; changes in the legal and regulatory environment, including tax legislation, labeling and advertising regulations, and litigation; impairments in the carrying value of goodwill, other intangible assets, or other long-lived assets, or changes in the useful lives of other intangible assets; changes in accounting standards and the impact of critical accounting estimates; product quality and safety issues, including recalls and product liability; changes in consumer demand for our products; effectiveness of advertising, marketing, and promotional programs; changes in consumer behavior, trends, and preferences, including weight loss trends; consumer perception of health-related issues, including obesity; consolidation in the retail environment; changes in purchasing and inventory levels of significant customers; fluctuations in the cost and availability of supply chain resources, including raw materials, packaging, energy, and transportation; effectiveness of restructuring and cost saving initiatives; volatility in the market value of derivatives used to manage price risk for certain commodities; benefit plan expenses due to changes in plan asset values and discount rates used to determine plan liabilities; failure or breach of our information technology systems; foreign economic conditions, including currency rate fluctuations; and political unrest in foreign markets and economic uncertainty due to terrorism or war. The company undertakes no obligation to publicly revise any forward-looking statement to reflect any future events or circumstances.

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Significant Items Impacting Comparability

Several measures below are presented on an adjusted basis. The adjustments are either items resulting from infrequently occurring events or items that, in management's judgement, significantly affect the year-to-year assessment of operating results.

The following are descriptions of significant items impacting comparability of our results.

Transaction costs

Fiscal 2025 transaction costs related to the definitive agreement for the Whitebridge Pet Brands acquisition and definitive agreements to sell our North American yogurt businesses. Immaterial transaction costs incurred in fiscal 2024. Please see Note 2.

Restructuring charges and project-related costs

Restructuring charges and project-related costs related to previously announced restructuring actions recorded in fiscal 2025 and fiscal 2024. Please see Note 3.

Acquisition integration costs

Integration costs resulting from the acquisition of a pet food business in Europe recorded in fiscal 2025. Integration costs primarily resulting from the acquisition of TNT Crust recorded in fiscal 2024. Please see Note 2.

Investment activity, net

Valuation adjustments of certain corporate investments in fiscal 2025 and fiscal 2024. Please see Note 4.

Mark-to-market effects

Net mark-to-market valuation of certain commodity positions recognized in unallocated corporate items. Please see Note 4.

Goodwill impairment

Non-cash goodwill impairment charge related to our Latin America reporting unit in fiscal 2024. Please see Note 3.

Product recall

Costs related to the fiscal 2023 voluntary recall of certain international Häagen-Dazs ice cream products recorded in fiscal 2024.

CPW restructuring charges

CPW restructuring charges related to previously announced restructuring actions.

Adjusted Operating Profit Growth and Related Constant-currency Growth Rate

This measure is used in reporting to our Board of Directors and executive management and as a component of the measurement of our performance for incentive compensation purposes. We believe that this measure provides useful information to investors because it is the operating profit measure we use to evaluate operating profit performance on a comparable year-to-year basis. The measure is evaluated on a constant-currency basis by excluding the effect that foreign currency exchange rate fluctuations have on year-to-year comparability given the volatility in foreign currency exchange rates.

Our adjusted operating profit growth on a constant-currency basis is calculated as follows:

Adjusted Diluted EPS and Related Constant-currency Growth Rate

This measure is used in reporting to our Board of Directors and executive management. We believe that this measure provides useful information to investors because it is the profitability measure we use to evaluate earnings performance on a comparable year-to-year basis.

The reconciliation of our GAAP measure, diluted EPS, to adjusted diluted EPS and the related constant-currency growth rates follows:

See our reconciliation below of the effective income tax rate as reported to the adjusted effective income tax rate for the tax impact of each item affecting comparability.

Adjusted Earnings Comparisons as a Percent of Net Sales

We believe that these measures provide useful information to investors because they are important for assessing our adjusted earnings comparisons as a percent of net sales on a comparable year-to-year basis.

Our adjusted earnings comparisons as a percent of net sales are calculated as follows: