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GENERAL MILLS INC (GIS)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY25 delivered modest top-line growth but strong margin expansion: net sales $5.24B (+2% YoY), gross margin 36.9% (+250 bps YoY), GAAP EPS $1.42 (+39% YoY) and adjusted EPS $1.40 (+12% cc), aided by ~1.5 pts net sales and ~6 pts operating profit timing benefits that will reverse in 2H .
  • Management lowered FY25 guidance to fund stepped-up consumer value and brand support: adjusted operating profit now down 4% to 2% (prior down 2% to flat) and adjusted EPS down 3% to 1% (prior down 1% to up 1%); organic sales still flat to +1% but targeting the low end .
  • Portfolio shaping continues: completed acquisition of Whitebridge Pet Brands (Tiki Pets, Cloud Star) for $1.45B with ~$325M trailing retail sales; North American yogurt divestitures progressing (Canada closed in Q3) .
  • Near-term stock reaction catalysts: 3Q reversal of Q2 timing tailwinds and higher 2H investment weigh on EPS trajectory; watch Pet momentum, U.S. cereal execution, and category elasticity amid consumer value-seeking behavior .

What Went Well and What Went Wrong

  • What Went Well

    • Margin and EPS strength: gross margin expanded 250 bps to 36.9%; GAAP EPS $1.42 and adjusted EPS $1.40, both ahead of internal run-rate, aided by HMM savings and mark-to-market tailwinds .
    • Pet recovery: North America Pet net sales +5% to $596M and op profit +36% to $139M; management cited grain-inclusive messaging and targeted pricing in wet/treats driving pound volume back; “we’re really pleased with the progress we’re making on Pet” (Jon Nudi) .
    • U.S. cereal execution: pound share growth supported by Kelce brothers activation and Chex seasonal programs; “when we get on our front foot…we see growth” (Dana McNabb) .

  • What Went Wrong

    • Guidance cut: FY25 adjusted OP and EPS lowered to reflect incremental promotional/media spend and incentive comp reset; management targets low end of organic sales range .
    • International softness: segment op profit fell to $24M (vs $35M), with organic sales down 3% (China/Brazil weak) .
    • Underlying value-seeking consumer: more prolonged than anticipated, requiring broader value actions and targeted price investments in areas like refrigerated dough, Totino’s, and fruit snacks (pressuring price/mix) .

Financial Results

Overall performance (GAAP and adjusted)

MetricQ4 FY2024Q1 FY2025Q2 FY2025
Net Sales ($B)$4.71 $4.85 $5.24
Gross Margin % (GAAP)35.8% 34.8% 36.9%
Adjusted Gross Margin %34.9% 35.4% 36.3%
Operating Profit Margin % (GAAP)16.5% 17.2% 20.6%
Adjusted Operating Profit Margin %17.0% 17.8% 20.3%
Diluted EPS (GAAP)$0.98 $1.03 $1.42
Adjusted Diluted EPS$1.01 $1.07 $1.40

Additional YoY context (Q2 FY25 vs Q2 FY24):

  • Net sales +2%; gross margin +250 bps; adjusted gross margin +130 bps; GAAP EPS +39%; adjusted EPS +12% in constant currency .

Segment breakdown (Q2 FY2025)

SegmentNet Sales ($MM)YoY %Operating Profit ($MM)YoY %
North America Retail$3,321.5 Flat $862.3 Flat
International$690.6 +1% $23.8 (31%)
North America Pet$595.8 +5% $139.3 +36%
North America Foodservice$630.0 +8% $118.5 +24%
Total Segment OP——$1,143.9 +5%

KPI highlights (Q2 FY2025 components of reported net sales growth)

AreaVolume (pts)Price/Mix (pts)FX (pts)Reported Net Sales
North America Retail(1) +1 — Flat
North America Pet+9 (5) — +5%
North America Foodservice+5 +3 — +8%
International+5 (4) — +1%
Total Company+3 (1) — +2%

Notes:

  • Q2 benefitted from timing (Thanksgiving shift, trade/other expense phasing): ~1.5 pts to net sales and ~6 pts to operating profit; reversal expected in 2H (largely Q3) .

Guidance Changes

MetricPeriodPrevious Guidance (Q1 FY25)Current Guidance (Q2 FY25)Change
Organic Net Sales GrowthFY2025Flat to +1% Flat to +1%; targeting low end; ~1-pt 2H headwind from Q2 timing reversal Maintained range; lower bias
Adjusted Operating Profit (cc)FY2025Down 2% to Flat Down 4% to Down 2%; 2H headwinds: ~3 pts timing reversal, ~3 pts incremental growth investments, ~2 pts incentive comp reset Lowered
Adjusted Diluted EPS (cc)FY2025Down 1% to Up 1% Down 3% to Down 1% Lowered
Free Cash Flow ConversionFY2025≥95% of adjusted after-tax earnings ≥95% of adjusted after-tax earnings Maintained
Portfolio AssumptionsFY2025Yogurt divestitures excluded Yogurt divestitures and Whitebridge acquisition excluded from guidance until closed Updated note

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY24 and Q1 FY25)Current Period (Q2 FY25)Trend
Consumer value/promo intensityFY25 plan: accelerate organic growth via “remarkable experiences” and higher brand investment; HMM savings to offset 3–4% inflation Value-seeking behavior more prolonged than expected; stepped-up promotions/media targeted by category; investments working but lower FY25 profit outlook (CEO) Value actions broadened; investment higher
Input cost inflation and productivityOutlook: 3–4% input inflation; HMM 4–5% savings FY25 input cost inflation now ~4% with pressures in packaging/dairy/EU sugar/labor; HMM at ~5% this year (CFO) Inflation modestly higher; productivity solid
Pet (Blue Buffalo) recoveryQ1 Pet OP +7% YoY; strategy integration progressing Pet sales +5% and OP +36% YoY; ad-led recovery in Life Protection/Wilderness, targeted pricing in wet/treats; inventories normalized Improving trajectory
U.S. cereal executionQ1: category normalization; increased brand support Pound share growth via Kelce activation and Chex seasonal; plan to sustain with Game Day, Cheerios Protein Improving
International/ChinaFY24: International pressured; China/Brazil headwinds International OP down; China retail stores under review; shift focus to retail/foodservice channels Ongoing headwinds
Portfolio reshapingAnnounced yogurt divestitures in Q1 Completed Whitebridge acquisition; Canada yogurt sale closed; U.S. yogurt pending Executing plan

Management Commentary

  • “We made important progress accelerating our volume growth and market share trends… we’ve made incremental investments to bring consumers greater value… While these investments lower our profit outlook for fiscal 2025, they better position General Mills for sustainable growth in fiscal 2026 and beyond.” — Jeff Harmening, CEO (press release) .
  • “We’ve seen more prolonged value-seeking behavior than we anticipated… As we have increased our investments… the things that we’re doing are working… We’re investing in value across different categories… within those categories, they’re very targeted.” — Jeff Harmening (Q&A) .
  • “There’s about a… ~6-point benefit in the quarter [to op profit]… As you move into the back half… ~3 points from the reversal of those timing benefits (mostly Q3), ~2 points from incentive comp reset, and ~3 points from additional investment.” — Kofi Bruce, CFO .

Q&A Highlights

  • Scope/targeting of value investments: Targeted within categories (refrigerated dough, Totino’s, fruit snacks) rather than blanket cuts; analytics guide spend; willingness to pivot as response is monitored .
  • Pet momentum and inventory: Retailer inventories normalized; dollar share held for first time in 11 quarters; wet/treats improving; expect continued progress without inventory headwinds in 2H .
  • Input inflation raised to ~4%: Drivers include packaging, dairy, EU sugar, labor conversion costs, cocoa/fats; HMM ~5% offsets; supply chain digitization aiding logistics/service .
  • Cereal improvement: Kelce activation and Chex seasonal campaigns drove pound share; continued innovation (Game Day, Cheerios Protein) planned for 2H .
  • Incentive comp: FY25 reset less than 100% given lower guidance; still above prior-year payout; ~2-pt 2H OP drag embedded .

Estimates Context

  • S&P Global (Capital IQ) Wall Street consensus for Q2 FY25 (EPS, revenue) was not retrievable at time of analysis due to data access limits, so we cannot provide a vs-consensus beat/miss assessment for this quarter. Results and guidance comparisons above rely on company-reported data and management commentary .

Key Takeaways for Investors

  • Q2 quality better than the print: positive volume and share progress, margin expansion, and strong Pet recovery — but partially flattered by timing that reverses in Q3; expect a softer 2H earnings cadence as investments ramp .
  • Guidance reset is investment-led: stepping up consumer value and media to rebuild competitiveness; near-term EPS pressure for potential FY26 growth reacceleration (HMM ≥5% targeted in FY26 per later update) .
  • Pet is re-accelerating with expanded portfolio: Whitebridge (Tiki Pets/Cloud Star) adds exposure to fast-growing cat wet; Pet segment margin levered to HMM and insourcing benefits over time .
  • U.S. cereal demonstrating playbook efficacy: brand activations and innovation are translating to pound share gains; sustainability of unit momentum is a watch item into 2H .
  • International remains mixed: China retail store traffic soft; strategic shift toward retail/foodservice with tighter store footprint; monitor FX and price/mix headwinds .
  • 2H setup: model ~3Q payback of Q2 timing, increased promo/media, and incentive comp drag; watch category elasticity, retailer inventory behavior, and snacking slowdown risk cited in Q3 .
  • Portfolio simplification on track: Canada yogurt divestiture closed; U.S. yogurt close pending; expect proceeds to support buybacks within a leverage framework (~low 3x net debt/EBITDA) .