General Mills Q3 Revenue Falls 5%

Consumer food manufacturing giant General Mills (NYSE:GIS) reported mixed fiscal 2025 third-quarter earnings on Wednesday, March 19. Revenue of $4.8 billion fell short of analysts' consensus estimates of $4.96 billion and was down 5% year over year. This was primarily due to retailer inventory reductions, slow snack sales, and foreign currency challenges. Adjusted EPS fell to $1.00, representing a 15% decline year over year, but it beat the $0.96 expectation.

Overall, the quarter suggested financial pressures, and the company lowered its guidance for the remainder of the fiscal year.

Source: General Mills. Note: Analyst consensus estimates for the quarter provided by FactSet. YOY = Year over year.

Company Overview and Focus Areas

General Mills is a major player in the global consumer-food industry, managing over 100 brands in 100 countries. Its portfolio includes various consumer favorites in the categories of snacks, cereals, and pet foods. A key focus for the firm is leveraging its brands to reach a wider consumer base, maintain strong customer loyalty, and drive innovation. Strategic joint ventures, such as those with Nestlé (OTC:NSRGY) in the cereal sector, support its international footprint.

The company’s growth strategy involves ongoing investment in product innovation and marketing to remain competitive. Critical success factors include capitalizing on its strong brand equity and staying attuned to consumer preferences across diverse markets. Sustainability and corporate responsibility are also central to its business model, ensuring long-term competitiveness and market trust.

Quarterly Highlights

General Mills faced notable challenges in Q3, with sales down across several segments. North America Retail experienced a 7% net sales drop, while North America Pet saw an operating profit decrease of 20%. Meanwhile, the International segment's sales fell by 4%, largely due to unfavorable currency impacts. Despite these losses, the North America Foodservice segment exhibited resilience, with sales ticking up by 1%.

The decline in operating profit was exacerbated by lower gross profit and elevated selling, general, and administrative expenses. The company's reported operating profit decreased to $891 million, down 2% year over year, while its adjusted operating profit dropped 12.4% in constant currency. The decrease in diluted EPS to $1.12 reflects these fiscal pressures, compounded by a higher effective tax rate.

In response to current market conditions, General Mills implemented the Holistic Margin Management (HMM) strategy which yielded slight improvements in gross margin (up 40 basis points). However, rising input costs were an ongoing challenge. The external market environment, including inventory reductions by retailers in key segments, weighed heavily on performance.

Looking Ahead

Looking forward, management acknowledged the impact of supply chain dynamics and committed to addressing these issues to stabilize future sales. Management's focus on cost reductions and strategic initiatives reflects an intention to improve financial stability in the coming quarters. General Mills revised its full-year guidance downward, predicting a 1.5% to 2% decline in organic net sales. It also expects a 7% to 8% decline in both adjusted operating profit and EPS. Management remains optimistic about its strategic initiatives, including targeted cost efficiencies, expected to reduce the cost of goods sold by 5% in fiscal 2026.

Investors should watch for updates on General Mills' ongoing investments in innovation and brand support. The company is poised to enhance its competitive edge through acquisitions, like the partial acquisition of premium pet food brands. As external pressures like commodity price volatility persist, the company’s risk management strategies in its supply chain and pricing will be key focal areas following upcoming earnings releases.

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JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool recommends Nestlé. The Motley Fool has a disclosure policy.