General Mills: Q1 Sales Disappoint, Earnings Beat



  • General Mills reported mixed first-quarter results, with its sales falling short of estimates.
  • Its management reiterated its full-year guidance.

General Mills (GIS) announced mixed fiscal 2020 first-quarter results today. As expected, the company’s revenue disappointed and fell short of Wall Street estimates. Moreover, its top line fell YoY (year-over-year), reflecting weak volumes across all segments except its Pet segment.

Weak volumes in the company’s North American Retail segment are unlikely to sit well with investors. The segment was up against easy YoY comparisons, but its volumes fell 1%.

Despite soft sales, General Mills’ bottom line came in ahead of analysts’ expectations. Expanded margins, a decline in interest expenses, and a lower adjusted effective tax rate cushioned the company’s EPS, which registered double-digit growth.

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General Mills’ first quarter in detail

General Mills reported net sales of $4.0 billion in the first quarter, a fall of 2.2% YoY and below Wall Street’s consensus expectation of $4.1 billion. Weak volumes (-4%) more than offset the benefits of higher pricing (+3%). Meanwhile, currency fluctuations had a negative impact of 1% on the company’s first-quarter revenue. Its organic sales fell 1%, reflecting lower organic volumes offset in part by higher net selling prices.

On August 27, the J.M. Smucker Company (SJM) also disappointed with its first-quarter sales owing to lower volumes. J.M. Smucker’s first-quarter revenue fell 6% YoY, reflecting a 3% volume decline. The company’s organic sales also took a hit, reflecting weak volumes and lower coffee and peanut butter pricing.

On the contrary, the Kellogg Company (K), the Hershey Company (HSY), and Mondelēz (MDLZ) posted impressive organic sales growth. Kellogg’s organic sales improved 2.3% YoY driven primarily by higher net selling prices. Mondelēz’s and Hershey’s organic sales benefited from balanced growth in both volumes and pricing. Mondelēz’s organic sales rose 4.6% during its last-reported quarter.

Despite weak sales, General Mills impressed with its margins in the first quarter. Its adjusted gross margin expanded 160 basis points to 35.2%. Moreover, its adjusted operating margin expanded 130 basis points to 17.0%.

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GIS posted adjusted EPS of $0.79, up 11.3% YoY. Moreover, its adjusted EPS came in ahead of analysts’ estimate of $0.77. The company’s bottom line gained from margin expansion. A decline in its net interest expenses and a lower adjusted effective tax rate further drove its bottom line. Its net interest expenses declined 11% YoY, and its adjusted effective tax rate was 20.9% compared to 22.7% last year.


GIS’s management has reiterated its fiscal 2020 guidance and expects 1%–2% growth in organic sales in the year. Meanwhile, it expects its adjusted EPS to rise 3%–5%. Wall Street expects General Mills’ top line growth to remain low in the next couple of quarters. The company has annualized its Blue Buffalo acquisition, which could restrict its sales growth rate.

Meanwhile, analysts’ consensus estimate indicates a sequential slowdown in its earnings growth rate in the near term.


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