General Mills: Q4 Sales Decline as Consumer Demand Weakens

Cheerios and Chex Mix maker General Mills failed to keep pace in Q4 with the single-digit dollar sales growth of the prior-year period, per its quarterly earnings report posted today.

The results reflect the company’s struggles with lower volumes and retailer inventory reductions as well as a drop in demand among value-oriented shoppers due to ongoing inflation, CFO Kofi Bruce told investors during an earnings call this morning.

In the quarter ended May 26, net sales dropped 6% year-over-year to $4.7 billion, driven by unfavorable net price realization and mix as well as lower pound volume. Organic net sales were also down 6% and slowed from the third-quarter trend as a result of trade expense timing comparison and a modest decline in retailer inventory.

The Minneapolis-based company’s North America Retail segment saw organic net sales fall 1% due to declines in U.S. Meals & Baking and U.S. Morning Foods partially offset by growth in Canada. Additionally, segment operating profit decreased 14%, fueled by higher input costs, lower volume and higher SG&A expenses.

Fourth-quarter net sales for the North America Foodservice division increased 4% to $589 million. Net sales performance was led by strong growth on breads, cereal, and frozen biscuits.

Cost savings was one of the few bright spots in General Mills’ quarterly report. In Q4, the company lifted its bottom line via its Holistic Margin Management (HMM) cost saving program and reported gross margin growth of 230 basis points to 34.9% of net sales.

“We benefited from a more stable supply chain environment and our ability to drive higher-than-expected levels of HMM even in the face of volume declines,” Bruce told investors during the call. “We continue to have and capitalize on opportunities to internalize production that was previously external and to drive HMM.”

In Q4, operating profit fell 5% to $779 million, driven by intangible asset impairments and lower gross profit dollars, partially offset by lower selling, general and administrative expenses and lower restructuring charges.

Looking ahead, amid a continued uncertain macroeconomic backdrop for consumers across its core markets, General Mills expects volume trends in its categories will gradually improve in FY 2025. However, full-year category dollar growth is projected to be below the company’s long-term growth expectations.

Organic net sales for fiscal 2025 are expected to range between flat and +1% while adjusted operating profit is expected to range between -2% and flat in constant currency from the base of $3.6 billion reported in fiscal 2024.

According to Bruce, the company continues to eye M&A opportunities based on critical occasions, including priorities around breakfast as well as convenient meals and snacking. General Mills’ last major acquisition was pet food brand Blue Buffalo in 2018.

“Candidly, we’ve been working with our M&A capability throughout the cycle, and we continue to look aggressively at opportunities. At the same time, we’ve remained very disciplined and have very strong filters in terms of both return and value creation,” said Bruce.