Q2 2025 Earnings Summary
- Encouraging Progress in Volume Growth and Market Share: General Mills has made significant strides in accelerating volume growth and improving market share trends, particularly in North America Retail and Pet segments. Over 56% of priority businesses grew or held pound share in Q2, with improvements across all four segments.
- Strong Financial Performance in Q2 Fiscal 2025: The company reported a 7% increase in adjusted operating profit and a 12% increase in adjusted diluted earnings per share in constant currency for Q2 fiscal 2025. Adjusted gross margin increased by 130 basis points to 36.3%, driven by Holistic Margin Management (HMM) cost savings and higher volume.
- Strategic Portfolio Reshaping and Growth Investments: General Mills is actively reshaping its portfolio through strategic acquisitions and divestitures, including the proposed acquisition of Whitebridge Pet Brands, enhancing its position in the fast-growing premium pet food segment. These actions aim to improve the company's growth profile and deliver sustainable growth in fiscal 2026 and beyond.
- Adjusted operating profit is now expected to decline by 4% to 2% in constant currency for fiscal 2025. This lowered guidance reflects higher promotional investments and incremental expenses, potentially impacting profitability.
- Second-quarter organic net sales for the International segment were down 3%, driven by declines in China and Brazil. Continued double-digit traffic declines in Häagen-Dazs shops in China could further pressure international sales.
- Second-half adjusted operating profit is expected to be down roughly 8% in constant currency, due to reversal of favorable timing items, increased growth investments, and a partial reset of incentive compensation. This suggests weaker performance in upcoming quarters.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +2% | Primarily driven by favorable net price realization from carryover strategic pricing actions, partially offset by inflationary pressures on volume. The improvement from -1% in Q1 2025 stems from stronger performance in key categories and brand activation. |
Pet | +10% | Net sales grew due to lower input costs and better volume, supported by brand building, reintroduced grain-free products, and new pack sizes. This marks a turnaround from the -1% change in Q1 2025, reflecting improved promotional activity and product mix. |
North America Foodservice | +8% | Benefited from lower input costs, strong competitiveness in noncommercial channels, and HMM cost savings. Continued gains in away-from-home demand also contributed, building on the positive trends noted in earlier periods. |
Cereal | +7% | Driven by innovation (e.g., Fruity Cheerios), increased brand-building investment, and scaled merchandising events. The category also saw growth from shifting consumer habits toward at-home breakfasts compared to Q1 2025. |
Dough | -7% | Impacted by unfavorable price/mix and higher SG&A, reversing modest prior-year gains. While General Mills maintains a 75% share, category growth was insufficient to offset cost pressures despite new product launches and advertising. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Organic Sales Growth | FY 2025 | Flat to up 1% | Aims to accelerate organic sales growth | raised |
Adjusted Operating Profit | FY 2025 | Down 4% to down 2% in constant currency | No current guidance | no current guidance |
Adjusted Diluted EPS | FY 2025 | Down 3% to down 1% in constant currency | No current guidance | no current guidance |
Free Cash Flow Conversion | FY 2025 | At least 95% of adjusted after-tax earnings | No current guidance | no current guidance |
HMM Cost Savings | FY 2025 | 5% of COGS | No current guidance | no current guidance |
Input Cost Inflation | FY 2025 | 4% of COGS | No current guidance | no current guidance |
Adjusted Operating Profit Margin | FY 2025 | 2 points below prior ranges but higher than pre-pandemic | No current guidance | no current guidance |
Profit Outlook | FY 2025 | No prior guidance | Investments are expected to impact the profit outlook for the back half of FY 2025 | no prior guidance |
Dilution Impact | FY 2025 | No prior guidance | Yogurt divestiture: low single-digit % dilutive impact; White Bridge: de minimis | no prior guidance |
Incentive Compensation | FY 2025 | No prior guidance | Partial reset of incentive compensation, with payouts slightly less than initially planned | no prior guidance |
Consumer Behavior | FY 2025 | No prior guidance | Observations of prolonged value-seeking behavior among consumers have influenced investment strategies | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Organic Net Sales | Q2 2025 | Expected to range between flat and up 1% | +1.96% YoY (derived from total revenue of 5,240.1Vs 5,139.4) | Beat |
Adjusted Operating Profit | Q2 2025 | Expected to range between down 2% and flat | No actual data found in provided documents | N/A |
Adjusted Diluted Earnings Per Share | Q2 2025 | Expected to range between down 1% and up 1% | No actual data found in provided documents | N/A |
Free Cash Flow Conversion | Q2 2025 | Expected to be at least 95% of adjusted after-tax earnings | No actual data found in provided documents | N/A |
HMM Savings | Q2 2025 | Expected to deliver approximately 4% to 5% COGS savings | No actual data found in provided documents | N/A |
Capital Expenditures | Q2 2025 | Expected to total approximately 3.5% of net sales | No actual data found in provided documents | N/A |
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Margin Outlook
Q: How will input costs and investments impact margins?
A: Input cost inflation increased to 4% , driven by higher ingredient and manufacturing costs, including lapsing advantageous contracts. They are driving 5% Holistic Margin Management (HMM) and remain confident in managing inflation. -
Back-Half Profit Decline
Q: What drives expected profit decline in H2?
A: They anticipate an 8-point decline in operating profit in the back half, due to reversal of timing benefits (3 points), incentive compensation reset (2 points), and additional investments (3 points). -
Targeted Investments
Q: Are incremental investments targeted or broad?
A: Incremental investments are targeted within specific categories like refrigerated baked goods, Totino's, and fruit snacks, not across all products. They believe these will provide the best return and will adjust as they learn. -
Investment Sufficiency
Q: Will current investments suffice for growth?
A: They are confident that targeted investments will yield returns, as initial efforts are working but require slightly more than anticipated. They will monitor responses and pivot if needed. -
Pet Segment Performance
Q: What's the outlook for the Pet segment?
A: The Pet business is improving, with Life Protection Formula growing high single digits, and Wilderness improving from down 18% last year to down mid-single digits this year. They expect to return to growth in H2 and are gaining pound share. -
Inventory Levels in Pet
Q: Are there inventory issues in Pet?
A: Inventory levels at key customers are now at expected levels, and no issues are anticipated in H2. -
Regulatory Environment Impact
Q: How will regulations affect the business?
A: They have experience navigating regulations and will comply with new laws. For California's certified colors law effective in 2027, 85% of their cereal portfolio is already compliant; the rest will be by 2027. -
M&A Activities Impact
Q: How will recent deals affect the model?
A: The yogurt divestiture will be low single-digit dilutive, while the White Bridge acquisition is minimal. Proceeds from the yogurt sale will fund share repurchases, maintaining leverage around 3x net debt-to-EBITDA. The White Bridge acquisition closed today. -
Häagen-Dazs China Sales
Q: What's happening with Häagen-Dazs in China?
A: Experiencing double-digit declines due to a tough macroeconomic environment and lower traffic. Focusing on retail and foodservice channels with better margins and have closed underperforming stores. -
U.S. Cereal Business
Q: How is the U.S. cereal business performing?
A: Showing improvements, growing pound share through campaigns like the Kelcey Brothers promotion and Chex party mix. Plan to continue similar strategies in H2. -
Category Growth
Q: Are categories growing as expected?
A: Categories are normalizing to pre-pandemic levels, growing around 1%. They aim to stimulate growth through competitiveness and remarkable products. -
Pet Segment Margins
Q: Will Pet segment margins keep improving?
A: Achieved margin gains through HMM integration and internalizing volume. Expect to continue margin progress but gains may not be as large as recently. -
Timing Benefits Reversal
Q: How will timing benefits reversal affect Q3?
A: Most of the 6-point benefit from timing items in Q2 will reverse in Q3, impacting profits.