Minneapolis / MN. (gm) General Mills Inc. reported results for the first quarter ended August 28, 2022. «We continue to deliver strong performance in a highly volatile operating environment,» said General Mills Chairman and Chief Executive Officer Jeff Harmening. «Given the strength of our first-quarter results and confidence in our ability to adapt to continued volatility ahead, we are increasing our full-year outlook for net sales, operating profit, and EPS growth.»
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.
First Quarter Results Summary
- Net sales increased 4 percent to USD 4.7 billion, including a 5-point headwind from net divestiture and acquisition activity and 1 point of unfavorable foreign currency exchange. Organic net sales increased 10 percent, driven by positive organic net price realization and mix, partially offset by lower organic pound volume, including the impact of a voluntary recall on certain international Häagen-Dazs ice cream products.
- Gross margin was down 450 basis points to 30.7 percent of net sales, driven by higher input costs, unfavorable mark-to-market effects, and the impact of market index pricing on bakery flour, partially offset by favorable net price realization and mix. Adjusted gross margin was up 20 basis points to 34.9 percent of net sales, driven by favorable net price realization and mix and Holistic Margin Management (HMM) cost savings, partially offset by input cost inflation, the impact of market index pricing on bakery flour, and supply chain deleverage.
- Operating profit of USD 1.1 billion was up 29 percent, primarily driven by net gains on divestitures, partially offset by lower gross profit dollars and unfavorable net corporate investment activity. Operating profit margin of 23.0 percent was up 440 basis points. Constant-currency adjusted operating profit increased 8 percent, driven by higher adjusted gross profit dollars, partially offset by higher adjusted selling, general, and administrative (SG+A) expenses. Adjusted operating profit margin increased 70 basis points to 18.7 percent.
- Net earnings attributable to General Mills increased 31 percent to USD 820 million and diluted EPS was up 32 percent to USD 1.35, primarily reflecting higher operating profit. Adjusted diluted EPS of USD 1.11 increased 13 percent in constant currency, primarily driven by higher adjusted operating profit.
Notes on Comparability
Financial results in the quarter reflected the acquisition of Tyson Foods’ pet treat business in the first quarter of fiscal 2022; the divestiture of the European yogurt business in the third quarter of fiscal 2022; the divestiture of certain international dough businesses in the third and fourth quarters of fiscal 2022; the acquisition of the TNT Crust foodservice business in the first quarter of fiscal 2023; and the divestiture of the Helper main meals and Suddenly Salad side dishes business in the first quarter of fiscal 2023.
First-quarter results in fiscal 2023 also included the impact of a voluntary recall on certain international Häagen-Dazs ice cream products, which was a headwind to net sales and operating profit results in the International segment. Unallocated corporate items in the first quarter included an additional USD 22 million of charges related to product disposals associated with the ice cream recall that were excluded from adjusted operating profit results. Impacts of the recall are expected to be completed by the second quarter of fiscal 2023.