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General Mills, Inc. GIS reported mixed third-quarter fiscal 2025 results, wherein the bottom line surpassed the Zacks Consensus Estimate while the top line missed the same. Both earnings and net sales declined year over year, reflecting weaker performance. Organic net sales were below the company's expectations, primarily due to more-than-anticipated retailer inventory headwinds and a slowdown in snacking categories during the quarter. As a result, management lowered its guidance for fiscal 2025.
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General Mills posted adjusted earnings of $1 per share, which beat the Zacks Consensus Estimate of 95 cents. The bottom line declined 15% year over year on a constant-currency (cc) basis, attributed to reduced adjusted operating profit, increased adjusted effective tax rate and higher net interest expense. However, the impact was partially offset by reduced net shares outstanding.
Net sales dropped 5% to $4,842.2 million, impacted by reduced pound volume and unfavorable foreign currency exchange rates. Organic net sales also saw a 5% decline. According to Nielsen-measured data, retail sales inched down 1% in measured markets during the quarter. The four-point gap between organic net sales and retail sales growth was mainly due to reduced retailer inventory and the anticipated reversal of certain second-quarter timing benefits. The top line missed the Zacks Consensus Estimate of $4,955 million.
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GIS’ Quarterly Margin Performance
The adjusted gross margin declined 60 basis points (bps), reaching 33.4% of net sales, mainly due to input cost inflation, unfavorable net price realization and mix, and supply chain deleverage. However, Holistic Margin Management (“HMM”) cost savings provided a partial offset.
General Mills’ operating profit dropped 2% to $891 million, impacted by reduced gross profit dollars and increased selling, general and administrative (SG&A) expenses. This decline was slightly mitigated by a divestiture gain. Despite the profit dip, the operating profit margin improved by 50 bps, reaching 18.4%.
Decoding GIS’ Segmental Performance
North America Retail: Revenues in the segment came in at $3,009.1 million, down 7% year over year. The decrease was due to reduced pound volume and unfavorable net price realization and mix. The Canada yogurt divestiture contributed to a 1% reduction in net sales. Organic net sales declined 6%. Segment operating profit fell 14% to $648 million, mainly owing to reduced volume, input cost inflation and unfavorable pricing and mix. However, HMM cost savings offered some respite.
International: Revenues in the segment came in at $651.3 million, down 4% year over year. The results were impacted by a 5-point headwind from unfavorable foreign currency exchange, partially offset by a 4-point boost from the Edgard & Cooper acquisition. Organic net sales dropped 3%, thanks to declines in China and Brazil, though this was partially offset by growth in distributor markets, Europe and Australia. Segment operating profit dipped 1% to $18 million.
North America Pet: Revenues came in at $623.7 million, flat year over year. Results included a 5-point boost from the North American Whitebridge Pet Brands acquisition, while organic net sales declined 5%. Organic net sales underperformed all-channel retail sales, thanks to a decline in retailer inventory levels. Segment operating profit fell 20% to $102 million, impacted by a double-digit increase in media investment and elevated input costs.
North America Foodservice: Revenues came in at $555.3 million, which inched up 1% with organic net sales also up 1%. Growth was driven by strong performance in cereal and bread, though bakery flour sales declined. Despite a slowdown in away-from-home industry sales, the segment continued to gain market share in K-12 schools, healthcare and college & university channels. Segment operating profit grew 1% to $82 million, supported by favorable net price realization, mix improvements and HMM cost savings, though higher input and supply chain costs posed challenges.