General Mills today reported results for the first quarter ended August 26, 2018.
"Fiscal 2019 is off to a good start," said General Mills Chairman and Chief Executive Officer Jeff Harmening. "We drove organic net sales growth for the fourth consecutive quarter. The Blue Buffalo transition is progressing well, and we continue to expect double-digit top and bottom-line growth for that business this year, excluding acquisition-related charges. And we're on track to deliver our financial commitments, with first-quarter adjusted operating profit and adjusted diluted EPS results ahead of our expectations. Based on these results and our outlook for the year, we are reaffirming our full-year fiscal 2019 targets."
General Mills is pursuing its Consumer First strategy and executing against its three key global growth priorities to drive consistent topline growth: 1) competing effectively through strong innovation, effective consumer marketing, and excellent in-store execution; 2) accelerating growth on its four differential growth platforms including Häagen-Dazs ice cream, snack bars, Old El Paso Mexican food, and its portfolio of natural and organic food brands; and 3) reshaping its portfolio through growth-enhancing acquisitions and divestitures, including the recent acquisition of Blue Buffalo, the leading brand in the fast-growing wholesome natural pet food category in the U.S. By combining consistent topline growth, margin expansion, and disciplined cash conversion and cash returns, General Mills expects to generate top-tier total shareholder returns over the long term.
First Quarter Results Summary
- Net sales increased 9 percent to $4.09 billion. Organic net sales increased modestly, reflecting benefits from organic net price realization and mix across all four legacy operating segments, partially offset by lower organic volume in the North America Retail, Convenience Stores & Foodservice, and Europe & Australia segments.
- Gross margin decreased 200 basis points to 32.8 percent of net sales. Adjusted gross margin, which excludes certain items affecting comparability, decreased 160 basis points to 33.6 percent, driven by input cost inflation and a 130 basis point headwind from a one-time purchase accounting charge related to the Blue Buffalo acquisition, partially offset by favorable net price realization and mix and benefits from productivity initiatives.
- Operating profit totaled $602 million, down 1 percent from last year (please see Note 1 below for more information on the presentation of benefit plan non-service income). Operating profit margin of 14.7 percent decreased 130 basis points. Constant-currency adjusted operating profit increased 3 percent, including an 8-point headwind driven by the one-time purchase accounting charge. Adjusted operating profit margin decreased 80 basis points to 15.7 percent, including a 130 basis point unfavorable impact from the one-time purchase accounting charge.
- Net earnings attributable to General Mills totaled $392 million, down 3 percent from a year ago, reflecting lower after-tax joint venture earnings, lower operating profit, and higher net interest expense, partially offset by a lower effective tax rate. Diluted EPS totaled $0.65 compared to $0.69 in the prior year.
- Adjusted diluted EPS, which excludes certain items affecting comparability of results, totaled $0.71 in the first quarter, in line with the prior year in constant currency, driven by higher adjusted operating profit and a lower effective tax rate, partially offset by a 6-cent headwind from the one-time purchase accounting charge, higher net interest expense, and higher average diluted shares outstanding.
