General Mills: Reaffirms 2024 Guidance and Provides Update

Minneapolis / MN. (gm) General Mills Inc. provided an update on progress against its three enterprise priorities and reaffirmed its full-year financial outlook for fiscal 2024 in Boston (MA). «We entered fiscal 2024 with a sharp focus on the evolving external environment, headlined by moderating inflation, stabilizing supply chains, and a resilient but increasingly cautious consumer,» said General Mills Chairman and CEO Jeff Harmening. «As we navigate this dynamic landscape, we remain committed to executing on our key priorities for this year, which are to continue to compete effectively, improve our supply chain efficiency, and maintain our disciplined approach to capital allocation. We will continue adapting to the changing environment, and we remain on track to deliver our fiscal 2024 financial objectives.»

General Mills reaffirmed its full-year financial targets for fiscal 2024:

  • Organic net sales are expected to increase 3 to 4 percent.
  • Adjusted operating profit is expected to increase 4 to 6 percent in constant currency.
  • Adjusted diluted EPS is expected to increase 4 to 6 percent in constant currency.
  • Free cash flow conversion is expected to be at least 95 percent of adjusted after-tax earnings.

During discussions at the conference, the company provided an update on its three key priorities for fiscal 2024:

Continue to Compete Effectively

  • North America Retail (NAR): Retail sales for at-home food categories in the U.S. have continued to grow above pre-pandemic rates in Q1 of fiscal 2024 but have moderated from double-digit growth rates in fiscal 2023, reflecting less impact from inflation-driven pricing and increased value-seeking behaviors from consumers. As expected, NAR’s retail sales performance in Q1 has lagged category growth largely due to a challenging comparison to strong pricing-driven market share gains a year ago as well as the normalization of competitive on-shelf availability. NAR organic net sales growth is expected to outpace retail sales growth in Q1, due to faster growth in non-measured channels and a modest rebuild of retailer inventory. The company expects NAR volume trends to improve in the remainder of fiscal 2024, driven by a reduced headwind from pricing, greater impact from distribution, innovation, brand building, and quality merchandising, and a benefit from added capacity on certain constrained platforms.
  • Pet: As in human food, retail sales trends in the U.S. pet food category have been moderating recently, driven in part by less impact from pricing. With U.S. pet parents increasingly cautious about their economic outlook, some have been shifting toward more value-oriented products and channels as well as smaller pack sizes. In addition, pet parents spending more time away from home has negatively impacted the treats and wet food segments of the category. As a result of these more challenging category dynamics, the company now expects first-quarter fiscal 2024 Pet segment organic net sales to be roughly flat versus last year and segment operating profit margin to be approximately 19 percent. While Pet segment volume trends are expected to remain challenged in the months ahead amid a more difficult short-term U.S. pet food category dynamic, the company continues to see strong long-term growth opportunities for Blue Buffalo as the multi-decade trend toward humanization continues.
  • North America Foodservice (NAF): Consumer traffic in away-from-home food channels has been up modestly in recent months, and the NAF segment has been competing effectively by leveraging its advantaged sales, supply chain, and innovation capabilities. Organic pound volume and net sales are expected to be up in Q1, despite a headwind from market index pricing on bakery flour.
  • International: The company continues to build on its positive momentum in International, with strong year-to-date retail sales performance on ice cream, Mexican food, and snack bars, the segment’s three largest global platforms. With improved service levels and impactful innovation, the International segment is expected to generate organic net sales growth meaningfully above the company average in Q1 of fiscal 2024.

Improve Supply Chain Efficiency

The supply chain environment has steadily improved in recent months, with supply disruptions returning to pre-pandemic levels and General Mills’ customer service levels reaching the low- to mid-90s in the U.S. With a more stable supply chain allowing for more resources to be redirected toward productivity, the company remains on track to step up its Holistic Margin Management cost savings to 4 percent of cost of goods sold in fiscal 2024, compared to 3 percent generated in fiscal 2023.

Maintain Capital Allocation Discipline

General Mills is focused on maintaining its disciplined approach to capital allocation, beginning with capital investment into the business at roughly 4 percent of net sales in fiscal 2024. Dividend growth is the second capital priority, and the company announced a 9 percent increase to its quarterly dividend rate effective with the August 2023 payment. With debt leverage comfortably below its 3.0x target, the company has ample capacity to further reshape its portfolio with growth- and value-accretive acquisitions. After M+A, the company targets returning remaining cash to shareholders via share repurchases, which are expected to reduce average net shares outstanding by roughly 2 percent in fiscal 2024.

Accelerate Strategy

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.