Full Transcript: General Mills Q1 2027 Earnings Call

General Mills (NYSE: GIS ) held its first-quarter earnings conference call on Wednesday. Below is the complete transcript from the call. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

The full earnings call is available at Summary General Mills reported a sequential improvement in retail trends, with a focus on improving dollar share trends through price mix, premium innovation, and price pack architecture. The company highlighted innovation and renovation as key strategies, with successful product launches such as protein cereals and Totino's Blasted Rolls contributing to growth. Management provided guidance on inflation, expecting it at the higher end of the 4-5% range, with mitigation efforts through cost savings and strategic revenue management.

Challenges remain in specific categories like Totino's and fruit snacks, but improvements are expected with new product innovations and renovations. Pet segment performance was mixed, with growth in cat food and treats offset by challenges in dry dog food, particularly the Wilderness brand. E-commerce and digital transformation are priorities, with a focus on AI and efficient packaging to drive future growth. The company plans to increase marketing spend modestly, leveraging modern approaches such as influencer marketing and content studios.

General Mills aims to reduce leverage to three times net debt to EBITDA over the next few years, with sequential progress expected. Full Transcript OPERATOR Hello everyone. Thank you for joining us and welcome to General Mills fiscal 2027 Q1 earnings call. After today's prepared remarks, we will host a question and answer session.

If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Jeff Seaman, Vice President, Investor Relations and Corporate Finance. Jeff, please go ahead.

Jeff Seaman, Vice President, Investor Relations and Corporate Finance Thank you, Warren. And good morning to everyone. Thanks for joining us today for this live Q and A session on our first quarter fiscal 27 results. I hope you all had time to review our press release, listen to the prepared remarks and view our presentation materials which we made available this morning on our investor relations website.

Please note that in our Q and A session we may make forward looking statements that are based on management's current views and assumptions. So please refer to this morning's press release for factors that could impact forward looking statements and for reconciliations of non GAAP information to which we may discuss on today's call. I'm here this morning with Jeff Harmening, our chairman and CEO, Dana McNabb, our COO, and Kofi Bruce, our CFO. With that, we'll go ahead and open it up for Q and A.

So Warren, can you please get us started? OPERATOR We will now begin the Q and A session. Please limit yourself to one question and one follow up. If you would like to ask a question, please press star one to raise your hand.

To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality if you are muted locally. Please remember to unmute your device. Please stand by while we compile the Q and A roster.

Your first question comes from the line of Andrew Lazar with Barclays. Your line is open. Please go ahead. Andrew Lazar, Analyst at Barclays Great.

Thanks so much. Good morning everybody. Nice. Nice to see some sequential improvement, you know, starting to show through.

I guess I'd like to get a sense of the sort of pace of improvement in NAR specifically going forward. I know this quarter you saw retail trends improve sequentially in 2Q I guess. Would you expect further sequential improvement from the -2% this quarter or should we expect more of a stabilization at this point? Again, I'm talking about retail takeaway which excludes all the timing issue in Len.

Dana McNabb, COO Good morning, Andrew. Thanks for the question. Our focus is really on continuing to improve dollar share trends. I'm not the quarterly Nielsen estimates, but we are pleased with the improvement.

We saw two point improvement in dollar sales. We did improve our share performance in the majority of our categories. But as you probably noticed, we're not all the way to growth yet. So we still have work to do.

Where we're focused is really the first thing you'll see is we expect an improvement in price mix. If you recall in Q1 we hadn't lapped our base price investments yet. We will start to do that in Q2 and we like the plans we have against product mix, premium innovation and price pack architecture. We also will see accelerated innovation and renovation.

And we really like how our marketing is performing right now. We'll continue to focus on that. So again, we still have work to do. We had the Totino's business that was a problem for us all last year.

We've cut those declines in half. That's an area we'll continue to focus on. And we expect to see improved dollar performance throughout the year. Andrew Lazar, Analyst at Barclays Great.

And then, you know, I guess focusing on the share piece in NAR, a year ago it seemed like General Mills was showing sort of negative volume and share really across a pretty wide swath of categories. What does that look like today versus a year ago? And if it's far smaller number of categories today where the issues are, what's the sort of the planned fix for those? Thanks so much.

Dana McNabb, COO Well, as you'd mentioned, we were in a tough spot last year and this year we have seen pretty good improvement and we're encouraged by the momentum. We saw improvement in the majority of our categories and I'll give you a couple examples. 9. 1.

Another big business. 4 in share. 1. So we really do like what we're seeing and we're not to growth yet.

We know we still have more work to do and that's going to be an emphasis on price mix and innovation and renovation. The two spots that we're keeping our eye on, where we need to see more improvement, is Totino's, which I've already talked to. Pleased again that we cut those declines in half. But we have more work to do.

We have really good product innovation, Blasted Rolls. We have some better merchandising. We have strong renovation coming. So we feel good about that.

And then we have some challenges on fruit snacks. Now the category is growing remarkably fast. It's up about 13% in Q1, but we're really seeing some small insurgent brands enter and drive that with increased distribution. And so we need to up our game there.

We're going to really leverage our Annie's brand to bring some very strong new products to market. We just launched Nature Pals, which is a high fiber for great taste. We have some great renovation coming on our core business. So Totino's and fruit is where we'll focus on and then we expect to see continued improvement in the rest of our brands.

Andrew Lazar, Analyst at Barclays Got it. Thanks so much. OPERATOR Your next question comes from the line of Peter Galbo with Bank of America. Your line is open.

Please go ahead. Peter Galbo, Analyst at Bank of America Hey guys, good morning. Thanks for taking the question. Kofi, I was hoping you could shed a little bit more light on the inflation guidance.

Obviously having moved kind of up towards the higher end of the 4 to 5 range, I think it might be helpful just to outline maybe where inflation came in in Q1 and then just how you kind of see it pacing over the balance of the year and where that kind of exit rate on inflation might be as things currently stand today. Kofi Bruce, CFO Sure, Pete, thanks for the question.

Just to give you some texture, we did see inflation roughly within the range, maybe a touch lower than we expected in Q1, but at the low end of our range, around 4%, which if I look forward, you know, and take into account sort of our hedge positions, I would expect Q1, Q2, Q3 to be roughly similar and Q4 to be just a touch outside the range at around 6% based on everything in front of us right now. Peter Galbo, Analyst at Bank of America Got it. Okay, that's very helpful. And I wanted to dig in a little bit on pet.

I know there were a couple of maybe timing elements that happened in the quarter, the extra month of Whitebridge, but maybe the other thing that stood out was just the inventory. The retailer inventory headwind wasn't maybe as dramatic as you all would have anticipated in Q1. And I just wanted to pressure test a little bit on the go forward. How much of that low single digit headwind is maybe conservatism in pet versus Q1 being a bit of an anomaly from a retailer headwind standpoint.

Thanks very much. Kofi Bruce, CFO Sure. Let me start with Whitebridge first. I think as is consistent with most of our past acquisitions of any size, we generally are on a one month lag until we hit systems integration and then we do a catch up that almost always that has always flown through organic sales.

So that was expected at some point, one. And then the other point I would tell you is that it was worth about a point of growth on pet, maybe 15 basis points for the company. So not frankly all that large. On inventory, what I would tell you is this: we've been doing this long enough and the challenge is just on pet.

There's a lot of volatility, quarter to quarter. I do think, based on the customer mix progression, that we still expect a low single digit headwind from inventory over the course of the year. Mainly as our mix skews more and more towards customers who carry lower inventory levels. Can't probably get too precise on a quarterly basis about how that's going to flow.

So we would still stand by that forecast for the full year, however. Peter Galbo, Analyst at Bank of America Great. Thanks very much. OPERATOR Your next question comes from the line of Robert Mosco with TD Cowen.

Your line is open. Please go ahead. Robert Mosco, Analyst at TD Cowen Hi. Thanks.

I was hoping to drill down on the high single digit decline in dog food. Love Made Fresh I believe was entirely incremental in the quarter. So can you tell us how incremental it was? Because it wasn't in there a year ago.

And what's driving the declines? Is it just Wilderness or is there other factors? Dana McNabb, COO Hi Rob, thanks for the question. You're right.

When you look at our pet business right now, we're really pleased with the growth that we're seeing on our cat business. Our treats business has inflected to growth and we've seen significant improvement in Love Made Fresh. But the area that we're having challenges in our dry dog business. From a dry dog perspective, the category was down about mid single digits.

As you said, Life Protection Formula pretty much hung in there with the category. And it was Wilderness where we saw declines accelerate. And Wilderness is a place you will have heard on the prepared remarks where we've actually applied our remarkable experience framework testing to that business to try and diagnose the challenges. And we see that we really have to relook at the entire proposition: the product, the packaging, the marketing, the communication.

We have work to do. And we had the same challenge on our cat Tastefuls business a few years ago and it took us about 18 to 24 months to improve it. And that business is back to growth now. So the main challenge we see is on Wilderness and on Life Protection Formula.

We have some really good product news and renovation and new products coming in the back half that will really emphasize our ingredient superiority with benefits we know pet parents are looking for. And I really like the plans that are coming in the back half. Robert Mosco, Analyst at TD Cowen Okay, just a quick follow up. Wet dog food, small part of your business.

But how's that doing? I heard that there might be some shelf changes at specialty retailers in wet. Dana McNabb, COO Wet dog food is doing as we expected. It is down about 4%.

But that is not worse than we had planned. And I'm actually not familiar with the challenges that you're talking to. As far as I know, our plans are on track. OPERATOR Your next question comes from the line of Leah Jordan with Goldman Sachs.

Your line is open. Please go ahead. Leah Jordan, Analyst at Goldman Sachs Thanks for taking my question. Good morning.

It sounds like the step up in innovation and renovation you've done this year has been working. Just seeing if you could provide more detail on what's tracking better than expected and what is that telling you about the consumer. And then on the acceleration data that you noted, that's still to come. You know, what should we be looking for?

I think you called out cereal specifically for later this year, but any detail there as well. Thank you. Dana McNabb, COO So thanks for the question. From a new products perspective, we're really encouraged with what we're seeing.

We've stepped up the amount of new products. We've increased by about 50% over the last two years, have gone from 3% of net sales to 5% of net sales. And we really are focused on bringing new products with benefits we know the consumer values and will pay for. So when we look at the new products that have launched in Q1, we've seen really strong performance behind our protein cereals, particularly Honey Nut Cheerios.

Our blasted Totino's rolls that are bringing new bold flavors are doing really well. Our Latiara launch is also working really well in the Mexican category. And of course we've seen Love Made Fresh improve pretty significantly. So again, we're still one quarter in, but we're encouraged by the trial and repeat that we're seeing on those new products.

And as we look more to the back half of the year, I already mentioned that Life Protection formula has some great innovation coming with benefits we know the consumer value. We are leaning into significant new products in our snacks categories. So our bars categories, we're going to lean into more protein innovation there on Nature Valley, on LÄRABAR, we're scaling up our ghost bars business and we're even launching a meat snack in our EPIC business. And we'll continue to bring really strong marketing behind all of that.

So I really think we understand what the consumer values and we are bringing them appropriately to the categories that we play in and we'll continue to see improved momentum going forward. Kofi Bruce, CFO Thank you. Yeah. So in aggregate at the macro level, if you take our inflation guide and our guidance on HMM cost savings, those still roughly we expect to offset over the full year.

Set aside any of the phasing commentary I gave you. I think the other important thing to call out are the mechanical factors around 53rd week, which will, you know, obviously have an impact on gross margins as we move through the back half of the year just solely on that comparison. If you strip that out, actually we would expect our gross margins net to be roughly flat ex that mechanical factor. And then at operating margin we would just add the incentive comp reset as an additional mechanical factor on top of that.

But all things equal, those are kind of the big puts and takes I'd be watching. OPERATOR You bet. Your next question comes from the line of Chris Carey with Wells Fargo Securities. Your line is open.

Please go ahead. Chris Carey, Analyst at Wells Fargo Securities Hi everybody. Thank you for the questions. Dana, you mentioned that pricing was, you know, you were constructive about pricing.

I can't remember exactly, you know, how you framed it over the course of the year. Do you have a different expectation for pricing relative to where you started the year? I'm just conscious that foodservice pricing came in better, pet pricing came in better, although I assume mix was partly a factor there. So I'm just wondering if your pricing plans are similar, namely in the context of the current inflation backdrop.

And then I have a follow up. Dana McNabb, COO Good morning, Chris. Thanks for the question. Well, as you know, we did a lot of work last year to adjust our everyday prices and that was really important to stabilize our base volume and to help us get back to household penetration growth.

And so with that investment behind us as we move to fiscal 27, we're really focused on driving positive price mix. And that's with particularly strong contributions from product mix, from premium innovation, from price pack architecture. And we're seeing that work on things like Cheerios Protein, Love Made Fresh, Chex Mix tubs, et cetera. So that is where we're focused.

As Kofi did mention in his prepared remarks, though, we expect input cost inflation in the higher end of what we previously communicated in the 4% to 5%. And as we always do, we're going to work on all levers to address higher costs, whether that's through cost savings or through price mix. So HMM is always our first defense against inflation and then we have some transformation. But we have a very strong strategic revenue management toolkit as well.

And given this level of inflation, I would assume all levers in that toolkit are on the table: trade, mix, list pricing, et cetera. Chris Carey, Analyst at Wells Fargo Securities Okay. Okay, thank you. The follow up is the inflation outlook.

Kofi, I think you had mentioned inflation would be somewhat similar in fiscal Q1, 2 and 3 and then step up in fiscal Q4. Clearly you have just nice hedging and good visibility over the course of the first few quarters of the year and then that step up. I mean this is way too early. But it's going to be such a strong year for HMM this year.

Can you get ahead of delivering this level of performance as we think more medium term?