Minneapolis / MN. (gm) General Mills Inc. reported results for the first quarter ended August 27, 2023. «We delivered growth on the top and bottom lines in the first quarter amid an evolving external environment characterized by moderating inflation, stabilizing supply chains, and a resilient but increasingly cautious consumer,» said Chairman and Chief Executive Officer Jeff Harmening. «Looking ahead, we will remain focused on executing our Accelerate strategy and driving strong growth for our brands. With confidence in our plans and our ability to adapt to continued change in the consumer landscape, we are reaffirming our guidance for fiscal 2024.»
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 4.9 billion, with favorable net price realization and mix partially offset by lower pound volume. Organic net sales also increased 4 percent, driven by positive organic net price realization and mix, partially offset by lower organic pound volume.
- Gross margin was up 540 basis points to 36.1 percent of net sales, driven by favorable mark-to-market effects and favorable net price realization and mix, partially offset by higher input costs. Adjusted gross margin was up 50 basis points to 35.4 percent of net sales, driven primarily by favorable net price realization and mix, partially offset by higher input costs.
- Operating profit of USD 930 million was down 14 percent, driven by net gains on divestitures in the prior year and higher selling, general, and administrative (SG+A) expenses, partially offset by higher gross profit dollars. Operating profit margin of 19.0 percent was down 400 basis points. Adjusted operating profit of USD 899 million increased 2 percent in constant currency, driven by higher adjusted gross profit dollars, partially offset by higher adjusted SG+A expenses, including a double-digit increase in media investment. Adjusted operating profit margin was down 40 basis points to 18.3 percent.
- Net earnings attributable to General Mills of USD 674 million were down 18 percent and diluted EPS was down 16 percent to USD 1.14, driven primarily by lower operating profit and higher net interest expense, partially offset by lower net shares outstanding. Adjusted diluted EPS of USD 1.09 was down 1 percent in constant currency, driven primarily by higher net interest expense and a higher adjusted effective tax rate, partially offset by higher adjusted operating profit and lower net shares outstanding.
Fiscal 2024 Outlook
General Mills expects the largest factors impacting its performance in fiscal 2024 will be the economic health of consumers, the moderating rate of input cost inflation, and the increasing stability of the supply chain environment. The company expects to drive organic net sales growth in fiscal 2024 through strong marketing, innovation, in-store support, and net price realization generated through its Strategic Revenue Management (SRM) capability, most of which will be carried over from SRM actions taken in fiscal 2023. For the full year, input cost inflation is expected to be approximately 5 percent of total cost of goods sold, driven primarily by labor inflation that impacts sourcing, manufacturing, and logistics costs. The company expects to generate Holistic Margin Management (HMM) cost savings of roughly 4 percent of cost of goods sold, compared to 3 percent achieved in fiscal 2023.