General Mills reported results for the first quarter ending August 28, 2022.
Highlights:
- Net sales increased 4% to $4.7 billion; organic net sales were up 10%.
- Operating profit increased 29% to $1.1 billion; adjusted operating profit was up 8% in constant currency.
- Diluted earnings per share (EPS) of $1.35 increased 32% from the prior year; adjusted diluted EPS of $1.11 was up 13% in constant currency.
- Company raises full-year fiscal 2023 outlook.
“We continue to deliver strong performance in a highly volatile operating environment,” General Mills Chairman and Chief Executive Officer Jeff Harmening, said in the announcement. “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% to $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%, 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% 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% 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 $1.1 billion was up 29%, 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% was up 440 basis points. Constant-currency adjusted operating profit increased 8%, 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%
Net earnings attributable to General Mills increased 31% to $820 million and diluted EPS was up 32% to $1.35, primarily reflecting higher operating profit. Adjusted diluted EPS of $1.11 increased 13% in constant currency, primarily driven by higher adjusted operating profit.
North America retail segment
First-quarter net sales for General Mills’ North America Retail segment increased 10% to $3.0 billion, driven by favorable net price realization and mix, partially offset by lower pound volume and a 1-point headwind from the Helper and Suddenly Salad divestiture. Organic net sales increased 12%. Net sales increased 14 percent in U.S. snacks, 10% in U.S. meals & baking solutions, 9% in U.S. Morning Foods, and 4 percent in Canada. Segment operating profit of $778 million was up 20% as reported and in constant currency, primarily driven by favorable net price realization and mix and HMM cost savings, partially offset by input cost inflation, lower volume, and supply chain deleverage.
North America foodservice segment
First-quarter net sales for the North America Foodservice segment increased 21% to $496 million, primarily driven by favorable net price realization and mix, including a 17-point benefit from market index pricing on bakery flour. Net sales results also included a 3-point benefit from the TNT Crust acquisition. Organic net sales were up 18 percent. Segment operating profit was down 25 percent to $54 million, driven by higher input costs and higher SG&A expenses, partially offset by favorable net price realization and mix.
Full-year fiscal 2023 financial targets
Organic net sales are now expected to increase 6 to 7%, compared to the previous expectation of 4 to 5% growth.
Constant-currency adjusted operating profit is now expected to range between flat and up 3% in constant currency, including a 3-point net headwind from divestitures and acquisitions and an estimated 1-point headwind from the ice cream recall. Adjusted operating profit was previously expected to range between down 2% and up 1% in constant currency, including the 3-point net headwind from divestitures and acquisitions.
Constant-currency adjusted diluted EPS is now expected to increase 2 to 5% in constant currency, including a 3-point net headwind from divestitures and acquisitions and an estimated 1-point headwind from the ice cream recall. Adjusted diluted EPS was previously expected to range between flat and up 3%in constant currency, including the 3-point net headwind from divestitures and acquisitions.
