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(Bloomberg) -- Cheerios maker General Mills Inc. lowered its profit outlook for fiscal 2025 as it moves to cut prices.
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General Mills Chief Executive Officer Jeff Harmening said in the earnings statement that the company made investments “to bring consumers greater value.” Even as it also lowered the company’s profit outlook, Harmening said the move positions it for “sustainable growth in fiscal 2026 and beyond.” Margins improved, General Mills said, but noted that cost inflation continues to be a factor.
Discounts have been across categories, but not applicable to every product line, executives added on the Wednesday earnings call. Advertising and new products have also helped boost sales, they said. Input cost inflation is now estimated at 4%, largely due to labor, packaging, dairy and sugar.
The shares fell 2.6% at 9:53 a.m. on Wednesday in New York. The stock had risen 1.2% so far this year through Tuesday’s close, versus a 27% gain for the S&P 500 Index.
With shoppers purchasing fewer items at the supermarket after years of price increases squeezed budgets, companies like General Mills have been forced to offer more discounts to shoppers. Food companies have been looking for ways to expand margins through operational efficiencies, which has also driven more interest in mergers and acquisitions.
“We continue to see a pressured consumer driving headwinds for many branded food categories, with GIS’s higher levels of discounting as the latest concession to hesitant shoppers,” wrote Piper Sandler analysts led by Michael Lavery.
For General Mills, the impact of price cuts was clear: The company said that it dropped prices on some pet food, and rebuilt retailer inventory, driving sales improvements in the category. In North American retail, overall pounds sold declined while prices went up, but discounts improved sales in cereal and fruit snacks.
The company now expects adjusted earnings per share to range between a decline of 3% to 1%, compared with a previous range of down 1% to up 1%. Organic sales are expected to be on the low end of the range between flat and up 1% due to promotional investments.
While Harmening said it was still “pretty early” to talk about the impact of changing regulations, he said that the company does and will always comply with any changes, and that he is confident in the company’s research and development team.
“We were able to reformulate our products frankly better and more effectively than our competitors,” he said about changing federal school food standards. He also noted that 85% of the company’s current cereal portfolio is compliant with the California legislation banning certain dyes from school foods, effective in 2027.