General Mills Earnings: Resilient Amid Divestiture Headwinds and Fresh Investment Push
- Hardik Shah
- Sep 17
- 4 min read
TLDR
Revenue Strength: Net sales fell 7% to $4.5B; organic sales down 3% amid yogurt divestiture and price investments.
Margin Trends: Adjusted operating profit down 18% in constant currency; GAAP profit inflated by divestiture gains.
Forward Outlook: FY26 guidance reaffirmed; focus on volume-led growth, fresh pet food launch, and brand investment.
Business Overview
General Mills, Inc. (NYSE: GIS) is a global Consumer Packaged Goods (CPG) company with a diverse portfolio of iconic brands spanning cereal, snacks, meals, baking, pet food, ice cream, and foodservice. The company manages over 100 brands worldwide, including Cheerios, Pillsbury, Betty Crocker, Nature Valley, Häagen-Dazs, and Blue Buffalo. Operations are spread across four major segments: North America Retail, North America Pet, North America Foodservice, and International.
The company recently completed the divestiture of its U.S. yogurt business and is ramping up growth in pet food, particularly with the launch of Blue Buffalo into fresh pet food.
General Mills Earnings Q1 FY26
Revenue: Q1 net sales were $4.5B, down 7% YoY; organic sales declined 3%. Results reflect a 4-point headwind from acquisitions/divestitures.
Margins:
Gross margin fell 90 basis points to 33.9%.
Adjusted gross margin fell 120 bps to 34.2%, pressured by higher input costs.
Profitability:
GAAP operating profit more than doubled to $1.7B, boosted by a $1.05B gain on yogurt divestiture.
Adjusted operating profit was $711M, down 18%.
Diluted EPS rose 116% to $2.22; adjusted diluted EPS was $0.86, down 20%.
Drivers: Pricing investments to restore competitiveness pressured near-term results; inflation weighed on margins, partly offset by productivity savings.
Forward Guidance
GIS reaffirmed FY26 guidance—organic net sales expected between -1% and +1%, while adjusted EPS and adjusted operating profit are projected to fall 10–15% in constant currency. Free cash flow conversion is expected at least 95%.
Risks & Opportunities: Tariffs, commodity inflation, and incentive expense normalization are headwinds. Strategic opportunities include innovation, stronger in-store activation, and the Blue Buffalo fresh pet food rollout.
Operational Performance
North America Retail: Sales down 13% to $2.6B, hit by yogurt divestiture and price investments. Segment profit fell 24%. Yet GIS held/gained pound share in 8 of its top 10 categories.
North America Pet: Sales rose 6% to $610M (boosted by Whitebridge acquisition), but organic sales fell 5%. Segment profit down 5% amid launch investments.
North America Foodservice: Sales down 4% to $517M (yogurt divestiture impact). Organic sales up 1% on cereal and biscuits; profit stable at $71M.
International: Sales up 6% to $760M; organic sales grew 4%. Segment profit surged 196% in constant currency.
Market Insights
CEO Jeff Harmening highlighted that category volumes remain broadly stable, with declines largely tied to inflationary shocks over recent years rather than structural issues. He emphasized that “we are staying laser focused and clear on our strategy, which is returning to profitable organic growth as the best way to create value for our shareholders”.
Consumers are seeking value, prompting pricing resets across categories such as cereal, snacks, and soup. Private label competition remains strong, while innovation (e.g., Cheerios Protein, Progresso Pitmaster soups, Nature Valley protein bars) is helping offset trade-down pressure.
Consumer Behavior & Sentiment
GIS reported its first increase in U.S. household penetration since FY22, driven by better price-value dynamics and innovation.
Elasticities improved in refrigerated dough, fruit snacks, and salty snacks following pricing resets.
Health-driven demand for protein-rich options is benefiting Cheerios Protein, Progresso Pitmaster, and Nature Valley expansions.
Strategic Initiatives
Innovation: New product volumes up 25% YoY; innovation now contributes ~5% of sales, up from 3.5%.
Pet Expansion: Blue Buffalo fresh pet food launch underway—1,000 coolers to be installed by September-end, scaling to 5,000 by Q2.
Efficiency: Holistic Margin Management (HMM) expected to deliver cost savings equal to 5% of COGS. AI-driven forecasting is freeing up marketing and supply chain teams to focus on growth initiatives.
Portfolio: Continued portfolio reshaping with yogurt divestitures and pet category expansion.
Capital Allocation
Dividends: Paid $331M in Q1 (vs. $338M prior year).
Share Repurchases: $500M repurchased (vs. $300M prior year).
Debt & Liquidity: Net debt remains elevated; interest expense rose to $133M from $124M YoY.
The Bottom Line
General Mills delivered results broadly in line with expectations, balancing the near-term drag from yogurt divestitures and pricing investments with encouraging early signs of volume stabilization and innovation-driven growth.
For investors, three key watchpoints emerge:
Execution of fresh pet food rollout as a growth catalyst in FY26.
Margin recovery in H2, as Q2 is expected to absorb heavier inflation and timing headwinds.
Sustained innovation momentum—with new product contribution stepping up meaningfully.
GIS remains a stable CPG player navigating inflationary and competitive pressures, but the inflection to sustainable organic growth hinges on successful execution of pricing, innovation, and pet expansion strategies.
--
Stay informed. We break down earnings, trends, and policy shifts shaping consumer staples and adjacent industries — no paywalls, no newsletters, just actionable insights wherever you scroll. Follow us on LinkedIn and X.
Comments