General Mills, Inc. 2027 Q1 Earnings Call

Hello, this is Jeff Siemon, Vice President of Investor Relations and Corporate Finance. Thank you for listening to General Mills' prepared remarks for our fiscal 2027 first quarter earnings. Later today, we will hold a live question and answer session on our first quarter results, which you can hear via webcast on our investor relations website. Joining me for today's presentation are Jeff Harmening, our Chairman and CEO, Dana McNabb, our Chief Operating Officer, and Kofi Bruce, our CFO. Before I hand things over to them, let me first touch on a few housekeeping items. First, on our website, you will find today's earnings press release, along with a copy of the presentation and a transcript of these remarks. Please note that today's remarks include forward-looking statements that are based on management's current views and assumptions.

The second slide in the presentation lists several factors that could cause our future results to be different than our current estimates. With that, I will turn it over to Jeff.

Thank you, Jeff, and hello to everyone. Let me start with the three messages I want you to take away today. First, we are off to an encouraging start in fiscal 2027. Our remarkability playbook is working, driving improved top-line performance by delivering stronger product innovation and renovation focused on the benefits consumers are looking for today, and we have more work to do. Second, we are continuing to deliver industry-leading cost savings in a volatile environment. We are on track to deliver $750 million in savings this year between our holistic margin management program, our transformation initiative, and other efficiency efforts. This work is about more than cost mitigation and reduction. It is about making General Mills future fit, modernizing how we operate, reimagining our supply chain, and building the flexibility to innovate faster.

Third, with solid first quarter results, improving end market momentum, and our transformation and cost savings work on track, we are reaffirming our full year fiscal 2027 guidance. In terms of first quarter performance, organic net sales were flat to last year, adjusted operating profit was down 11%, and adjusted diluted EPS was down 13%. These results finished ahead of our expectations, driven largely by improved retail sales trends in North America Retail, North America Foodservice, and International, as well as a good start on our cost savings programs. We remain focused on delivering against the three key priorities we laid out on our Q4 earnings call. First, we are strengthening our organic sales growth by driving a step change in remarkability. That means delivering benefit-focused innovation and renovation across our portfolio and improving the total consumer experience across product, packaging, brand communication, omni-channel execution, and value.

Second, we are accelerating enterprise transformation. We are simplifying our processes, reimagining our supply chain, and redesigning how work gets done so we can increase speed, efficiency, and flexibility across the business. Third, we are driving disciplined capital allocation and returns. We remain sharply focused on generating cash, paying our dividend, and reducing leverage, all while continuing to invest behind the opportunities that will create the most value for our shareholders. We remain confident in our plans to drive further improvement in the rest of the year, and we are on track to deliver our full year guidance, which is summarized on slide seven. With that, I will turn it over to Dana.

Thank you, Jeff, and hello, everyone. Let me tell you how executing our remarkability playbook is leading to stronger growth and how we are driving efficiency to combat inflation and enable investment in our brands. We entered fiscal 2027 with a stronger foundation due to the decisive action we took last year to bring more value to consumers by adjusting base prices to address key price cliffs and gaps. With that investment behind us, our full focus this year is on accelerating our pace of product innovation and renovation to deliver more of the lasting benefits that consumers are looking for today. This includes more protein and fiber, clean labels, bold flavors, fun and indulgence, and pet humanization. We will leverage our strategic revenue management toolkit to strengthen price mix with a particular focus on mix.

I am encouraged by the early signs of progress we are seeing in Q1, driven by our focus on remarkability. It is evident in the results we delivered this quarter in North America Retail. NAR retail sales improved by roughly 2 points versus fiscal 2026, as we made our products and brand communications stand out more for consumers. We have increased the contributions from innovation and renovation in NAR this year with core brands like Cheerios, Annie's, and Pillsbury, and new brands like La Tiara and Wanchai Ferry. We have also stepped up our marketing game, bringing in new agency partners, building a next-generation content studio, and doubling our use of influencers to maximize our reach and engagement. We have further to go. While most of NAR's priority businesses delivered improved market share trends in Q1, some are not yet back to absolute share growth, and we are focused on improving this trajectory.

With continued improvement in base volume, increasing benefits from favorable mix, and growth in household penetration and distribution, we are building momentum with an expectation for stronger results ahead. Cereal is a good example of how we put the remarkable experience framework into action. We continue to bring superior products to consumers, including the successful launch of Honey Nut Cheerios Protein. We now have a portfolio of tasty, affordable protein cereals that generates roughly $200 million in retail sales and has been growing at a strong double-digit rate across the Cheerios, Nature Valley, and GHOST brands. We have elevated the effectiveness of our brand communications, including creating viral moments with Lucky Charms on college campuses, modernizing the Reese's Puffs wrap with GloRilla, and collaborating with K-Pop Demon Hunters on Cinnamon Toast Crunch and Lucky Charms.

We drove household penetration growth and low single-digit retail sales growth for these three core taste brands in Q1, which was up from a mid-single digit retail sales decline in fiscal 2026. We are bringing cereal consumers more value by offering cups and smaller boxes to deliver lower entry price points and innovating with tubs and other large formats to offer an attractive price per ounce for larger households. Thanks to these initiatives, retail sales growth for our total U.S. cereal portfolio improved by 2 points versus the prior quarter, and we are excited for more cereal innovation and marketing to come later this year. Pillsbury Refrigerated Dough is another great example of how we have improved brand remarkability. Our investments in value stabilized our base volume last year, and we are building on that with compelling innovation, renovation, brand communication, and omni-channel execution this year to accelerate our dollar sales trend.

We renovated 70% of our canned dough line in Q1 with more cinnamon, more icing, and more flakiness, and we paired that news with a compelling new brand campaign. We also launched innovations with bolder flavors, including hot honey and maple varieties of Grands! biscuits, as well as new Grands! fruit rolls. We continued bringing a steady flow of news on our Pillsbury cookie dough line, including fun shapes, seasonal offerings, and a Harry Potter brand partnership. These initiatives deliver results with Pillsbury's household penetration growing and retail sales stabilizing in Q1 after eight consecutive quarters of declines. We plan to continue this momentum on Pillsbury into key baking season this fall and winter. Our remarkability focus is also gaining traction in our North America Pet business.

Q1 marks the eighth consecutive quarter where we delivered at least mid-single digit retail sales growth in cat feeding, where our premium and differentiated product strategy is winning with cat parents. Tiki Cat continues to be a growth engine, delivering double-digit retail sales growth in Q1 and gaining share. Tiki's positioning around minimally processed whole food and visible real ingredients gives us a differentiated platform to recruit new pet parents, and we are increasing consumer support and expanding distribution selectively in fiscal 2027 while preserving the brand's strong premium position. Retail sales for Blue Tastefuls were up mid-single digits in Q1, driven by household acquisition in both wet and dry cat food, expanded distribution, and strong innovation. We have more exciting innovation and a product renovation planned for Tastefuls in the second half, supported by increased investment in a national media campaign to broaden awareness and reinforce the brand's taste credentials.

We also continued to accelerate our performance on Love Made Fresh, with Q1 retail sales growing roughly 30% over Q4, driven by strong results for our stand-up resealable pouch and improved on-shelf availability. Our focus this year remains on driving awareness and trial and further accelerating turns for Love Made Fresh, supported by sharper communications highlighting our natural and superior nutrition positioning. Next, let me give you an update on our efforts to improve performance on Totino's and Wilderness, which are key focus areas in fiscal 2027. On Totino's, we made good progress in Q1, reducing last year's pound decline by more than half, thanks to sharper merchandising execution, brand support, and innovation. Our new Blasted Rolls and Ultimate Pizza performed well in Q1, and we have product renovation news coming later in fiscal 2027 that we expect to accelerate our path back to growth.

On Wilderness, our retail sales decline in Q1 was similar to FY 2026, and this business remains the most challenged part of our dry dog feeding portfolio. We are assessing all aspects of our offering, including the product, packaging, positioning, and value. With a more comprehensive set of changes required, we expect our efforts to stabilize Wilderness will take time. In the meantime, we will continue to lean into the attractive growth opportunities in our pet portfolio across cat feeding, treating, Life Protection Formula, and Love Made Fresh. Our North America Foodservice and International segments delivered great results in Q1, with both segments posting mid-single digit organic net sales growth. Our NAF team's strategic focus on leading in breakfast and expanding our frozen baked goods portfolio continues to work.

Our removal of certified colors from our cereal portfolio and operator first innovation, like our new sheeted desserts, helped NAF grow or hold share in 100% of its priority businesses in the quarter. In International, we are building off positive momentum from fiscal 2026, and in Q1, we continued our work to strengthen our global brands, including Häagen-Dazs, Old El Paso, and Nature Valley. For example, product renovation news on Häagen-Dazs Cookies & Cream and Belgian Chocolate drove double-digit retail sales growth for both varieties in Q1. I am encouraged by the momentum we have built in North America Foodservice and International, and with strong plans in place for the remainder of the year, both segments are poised to deliver solid top-line growth and margin expansion in fiscal 2027.