General Mills (GIS, Financial) reported a modest earnings beat, in-line revenue, and flat volume growth for Q1 (August), leading to a muted market response. The company reiterated its FY25 (May) financial targets, which was expected following its earlier guidance this month. Despite a recent +20% share price increase since June, investors were hoping for stronger Q1 results.
- Net sales and organic net sales decreased by 1% year-over-year to $4.85 billion. Adjusted EPS fell by 6% (2% excluding FX impacts) to $1.07. Both organic revenue and constant currency EPS growth missed GIS's FY25 targets of flat to up 1% and down 1% to up 1%, respectively. This was anticipated due to challenging year-over-year comparisons.
- Sequentially, GIS showed improvement with net sales up 3% and EPS rising 6%. Pound volume remained flat compared to last year, an improvement from the 2% drop in Q4. Although GIS has not seen positive year-over-year volume growth in ten quarters, the sequential gains offer hope for FY25.
- The demand environment remains challenging as consumers seek value amid inflation. Stabilizing supply chains of competitors provide more private-label alternatives. In China, headwinds have led to a significant year-over-year drop in traffic at GIS's Haagen-Dazs shops.
- At-home food prices have stabilized, unlike rising away-from-home prices, shifting consumer preferences towards at-home food occasions. GIS estimates this shift contributed to 1 point of pound volume growth in its U.S. retail categories in Q1, exceeding long-term expectations.
- In the Pet segment, GIS posted improved retail sales and market share trends, resulting in a 3% volume increase, reversing a 7% drop last quarter. In Foodservice, volumes were flat compared to a 3% increase in Q4. However, GIS continued to gain market share in key away-from-home channels, including schools, healthcare, and universities.
While GIS's Q1 report had some silver linings, many of these were already highlighted earlier. The gradual volume improvement and continued market share gains were noted, setting higher expectations for Q1 results. Without more robust growth, some investor enthusiasm waned.
