General Mills, Inc. (NYSE:GIS), the maker of Cheerios, Blue Buffalo pet food, and other household staples, reported fiscal 2026 first-quarter results that came in slightly ahead of Wall Street expectations, but shares traded lower after the release.
Adjusted earnings per share came in at 86 cents per share, topping analyst estimates of 81 cents per share, while revenue of $4.52 billion edged past projections of $4.51 billion.
Reported net sales fell 7% from a year earlier, weighed down by a 4-point drag from divestitures and acquisitions, while organic sales declined 3%.
Operating profit more than doubled, rising 108% to $1.7 billion on the back of a $1.05 billion gain from the U.S. yogurt divestiture. On an adjusted basis, operating profit slipped 18% in constant currency to $711 million.
Gross margin slipped 90 basis points to 33.9% of net sales, while adjusted gross margin fell 120 basis points to 34.2%. Adjusted operating profit margin contracted 210 basis points to 15.7%. Net earnings attributable to General Mills increased 108% to $1.2 billion.
In North America Retail, sales dropped 13% to $2.6 billion, reflecting an 8-point headwind from yogurt divestitures. Organic sales fell 5%. Segment operating profit decreased 24% to $564 million. Retail sales were down 4% in Nielsen measures, with improved pound competitiveness in eight of the top 10 U.S. categories.
North America Pet revenue rose 6% to $610 million, supported by an 11-point lift from the Whitebridge Pet Brands acquisition. Organic sales were down 5%, reflecting shipment timing differences. Operating profit declined 5% to $113 million, pressured by higher input costs and SG&A, including investments ahead of a fresh pet food launch.
North America Foodservice net sales fell 4% to $517 million, with a 5-point headwind from yogurt divestitures. Organic sales rose 1%, led by cereal and biscuits, though bakery flour pricing was a 2-point drag. Segment operating profit was flat at $71 million.
International net sales climbed 6% to $760 million, including a 3-point benefit from foreign exchange. Organic growth was 4%, led by India, North Asia, and Europe. Operating profit rose to $66 million from $21 million a year earlier, with timing benefits expected to unwind later in fiscal 2026.
Cash provided by operating activities was $397 million, down from $624 million last year. Cash and equivalents stood at $953 million at the end of the quarter compared to $468 million a year ago.
Share repurchases increased to $500 million from $300 million. Capital investments were $110 million versus $140 million, while dividends paid totaled $331 million.
“Our primary goal in fiscal 2026 is to restore organic sales growth by investing in greater value, innovation, and product news for consumers,” said Chairman and Chief Executive Officer Jeff Harmening. He added, “We will continue to drive further improvement this year behind disciplined execution of our price investments, new advertising campaigns, stronger in-store events, and exciting innovation like Blue Buffalo’s launch into fresh pet food that is just now starting to ship to customers.”
Outlook
General Mills reaffirmed its fiscal 2026 outlook. The company forecasts adjusted operating profit and adjusted EPS to decline 10% to 15% in constant currency. Organic net sales are expected to range between down 1% and up 1%.
Free cash flow conversion is projected at least 95% of adjusted after-tax earnings. Management flagged input cost inflation, including tariffs, divestitures, acquisitions, and normalization of corporate incentive expense, as near-term headwinds.
Price Action: GIS shares were trading lower by 2.18% to $48.48 at last check Wednesday.
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