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GENERAL MILLS INC (GIS)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 net sales fell to $4.84B (-5% YoY), with diluted EPS $1.12 (-4% YoY) and adjusted EPS $1.00 (-15% constant currency), driven by retailer inventory reductions (~4pt headwind) and softness in U.S. snacking categories .
  • Gross margin rose 40 bps to 33.9% on HMM savings and favorable mark-to-market; adjusted gross margin declined 60 bps to 33.4% on input inflation and unfavorable mix .
  • Guidance cut: FY2025 organic net sales now down 2% to down 1.5% (from lower end of flat to +1%), adjusted operating profit and adjusted EPS now down 8% to down 7% (from down 4% to down 2%) in constant currency; cash conversion ≥95% unchanged. Bold reinvestment in value/media/innovation and FY2026 cost efficiency programs (≥5% COGS savings, ~$600M; ≥$100M incremental savings) to fund growth initiatives .
  • Management flagged Q4 investments to support value, visibility, and 2026 launches; highlighted improving share in Pet, Foodservice, International and progress in Pillsbury/Totino’s after incremental investments .

What Went Well and What Went Wrong

  • What Went Well

    • Continued positive market share trends in Pet, Foodservice, and International; improvements in Pillsbury refrigerated dough and Totino’s hot snacks following incremental investments: “we saw positive returns” .
    • Gross margin +40 bps YoY to 33.9% on HMM cost savings and favorable mark-to-market .
    • Foodservice segment net sales +1% and operating profit +1%; share gains across K-12, healthcare, and colleges/universities .

  • What Went Wrong

    • Organic net sales -5% with ~4pt headwind from retailer inventory reductions and reversal of Q2 timing items; Nielsen-measured retail sales -1% (gap primarily inventory) .
    • U.S. snacking slowdown; North America Retail net sales -7% to $3.01B, Morning Foods -10% (inventory reversal), Snacks mid-single-digit decline .
    • Pet segment operating profit -20% on double-digit media investment and higher input costs; organic net sales -5% lagged all-channel retail by ~5pts due to retailer inventory reductions .

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue (Net Sales) ($USD Billions)$5.10B $4.85B $5.24B $4.84B
Diluted EPS ($)$1.17 $1.03 $1.42 $1.12
Adjusted Diluted EPS ($)$1.17 $1.07 $1.40 $1.00
Gross Margin (%)33.5% 34.8% 36.9% 33.9%
Adjusted Gross Margin (%)34.0% 35.4% 36.3% 33.4%
Operating Profit Margin (%)17.9% 17.2% 20.6% 18.4%
Adjusted Operating Margin (%)17.9% 17.8% 20.3% 16.5%
Segment Net Sales ($USD Billions)Q3 2024Q3 2025
North America Retail$3.24B $3.01B
International$0.68B $0.65B
North America Pet$0.62B $0.62B
North America Foodservice$0.55B $0.56B
Total Segment Net Sales$5.10B $4.84B
Segment Operating Profit ($USD Billions)Q3 2024Q3 2025
North America Retail$0.75B $0.65B
International$0.02B $0.02B
North America Pet$0.13B $0.10B
North America Foodservice$0.08B $0.08B
Total Segment Operating Profit$0.98B $0.85B
KPIs (Q3 2025)Value
Organic Net Sales Growth (Total)-5%
Organic Net Sales Growth – NA Retail-6%
Organic Net Sales Growth – NA Pet-5%
Organic Net Sales Growth – NA Foodservice+1%
Organic Net Sales Growth – International-3%
Nielsen-Measured Retail Sales (Quarter)-1% across measured markets

Guidance Changes

MetricPeriodPrevious Guidance (Q2 FY2025)Current Guidance (Q3 FY2025)Change
Organic Net SalesFY2025Lower end of flat to +1% Down 2% to down 1.5% Lowered
Adjusted Operating Profit (cc)FY2025Down 4% to down 2% Down 8% to down 7% Lowered
Adjusted Diluted EPS (cc)FY2025Down 3% to down 1% Down 8% to down 7% Lowered
Free Cash Flow ConversionFY2025≥95% ≥95% Maintained
Tariffs ImpactFY2025Not reflected Not reflected due to uncertainty N/A
FY2026 HMM SavingsFY2026N/A≥5% COGS savings (~$600M gross productivity) New disclosure
FY2026 Incremental Cost SavingsFY2026N/A≥$100M targeted New disclosure

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Consumer Value & Promotional InvestmentQ2: Added targeted promo investments above original plans to deliver greater value; lowered FY profit outlook to fund improved volume/share . Q1: Reaffirmed FY outlook; planned significant brand-building increases supported by HMM savings .Q3: Stepping up investments in consumer value, media support (double-digit increases) and in-store visibility in Q4; focus on snacking price points and broader portfolio value optimization .Increasing reinvestment intensity
Retailer Inventory DynamicsQ2: Thanksgiving timing raised NA Retail inventory (expected reversal in H2) .Q3: ~4pt headwind from retailer inventory reductions; Pet inventory more volatile; expect no material further drawdown in Q4 .Transitory headwind normalizing
Snacking Category PerformanceQ1: U.S. Snacks down mid-single digits . Q2: Snacks up low-single digits; broader improvement .Q3: Snacking slowdown; fruit snacks pressured by value/private label competition; remediation via value, innovation, and marketing .Deteriorated in Q3; remediation underway
Pet (Blue Buffalo, Whitebridge)Q2: Pet returned to growth; OP +36% on HMM and volume .Q3: Net sales flat (organic -5%) with ~5pt retailer inventory drag; OP -20% on higher media and input costs; closed $1B Whitebridge North America acquisition .Mixed; investment-heavy quarter
Cereal & Morning FoodsQ2: Morning Foods up mid-single digits .Q3: Morning Foods -10% on inventory reversal; expect cereal improvement in Q4 with more media/merchandising .Near-term weak, expected rebound
HMM Productivity & FY2026 EfficiencyQ1/Q2: HMM savings 4–5% of COGS, above inflation .Q3: FY2026 ≥5% COGS (~$600M) plus ≥$100M additional savings to fund growth investment .Expanded savings disclosure
Tariffs/MacroQ1/Q2: Macro uncertainty; estimates exclude tariff impacts .Q3: Guidance continues to exclude new tariff actions in 2025 .Unchanged uncertainty

Management Commentary

  • “Our third-quarter organic net sales finished below our expectations, driven largely by greater-than-expected retailer inventory headwinds and a slowdown in snacking categories… we drove continued positive market share trends in Pet, Foodservice, and International as well as improvement in Pillsbury… and Totino’s…” — Jeff Harmening, CEO .
  • “We’re focused on improving our sales growth in fiscal 2026 by stepping up our investment in innovation, brand communication, and value… fund that investment with another year of industry-leading HMM productivity… and expected new cost-savings initiatives…” — Jeff Harmening .
  • “We’re stepping up our marketing double digits… you’ll see that on Blue Buffalo, on Pillsbury… in Cereal.” — Jeff Harmening (Q&A) .
  • “The purpose of the $100 million plus additional cost savings… is to free up resources to reinvest for growth… we’re not trying to drive specific improvements in margin.” — Kofi Bruce, CFO (Q&A) .
  • “On fruit snacks… a couple of big retailers introduced private label… job to do is value in the range, and getting back to innovation and marketing on the core.” — Jeff Harmening (Q&A) .

Q&A Highlights

  • Reinvestment cadence and mix: Q4 and FY2026 plans emphasize value (esp. fruit snacks), double-digit media on core brands, and fewer-but-bigger innovations; reinvest HMM savings and 53rd week benefits to drive growth .
  • Tailwinds/headwinds into FY2026: tailwinds include trade, innovation, easier laps from destock, HMM and cost efficiencies; headwinds include investments, possible tariffs, and yogurt divestiture profit headwind (approximate reference in discussion) .
  • Category dynamics and health trends: Management attributed snacking softness more to value-seeking and consumer confidence than GLP-1 impact; focus on functional benefits (protein/fiber) and taste across brands .
  • Fruit snacks/private label pressure: Plan to sharpen price gaps, add innovation (e.g., licensed launches) and marketing to regain share; bars expected to rebound faster; salty snacks need bold flavors and value .
  • Retailer inventory: Pet inventory volatility across large retailers (dry dog food most impacted); company expects no material Q4 inventory drawdown given current levels .

Estimates Context

  • S&P Global consensus data for EPS/revenue/EBITDA was unavailable at time of request due to provider rate limits, so explicit beat/miss versus Street cannot be quantified in this recap. Anchor comparisons are deferred until access resumes [GetEstimates error].
  • Management indicated results finished below internal expectations (organic net sales) and lowered FY2025 guidance accordingly, implying Street estimates may need downward revision given reduced topline and profit targets .

Key Takeaways for Investors

  • Guidance reset and reinvestment pivot: The lowered FY2025 outlook and explicit Q4 reinvestment are near-term EPS headwinds but position GIS to re-accelerate organic growth into FY2026; watch execution on value gaps and media ROI in cereal/snacks and Blue Buffalo .
  • Inventory headwinds appear transitory: ~4pt inventory drag and Pet volatility pressured Q3; management expects no material further drawdown in Q4—monitor reported-to-retail sales gap normalization .
  • Cost efficiency visibility improves: FY2026 HMM ≥5% COGS (~$600M) plus ≥$100M incremental savings provides funding for innovation/brand support without relying on margin expansion; reduces risk to sustaining higher investment levels .
  • Segment focus: Foodservice remains resilient with share gains and profit growth; International pressured by FX and mix; NA Retail and Pet require value/innovation/marketing to regain competitiveness—track Q4 cereal recovery and fruit snacks remediation .
  • Portfolio reshaping: Completed Canada yogurt sale ($96M gain) and closed $1B Whitebridge Pet Brands North America acquisition; U.S. yogurt sale expected in 2025—model divestiture-related profit impacts and Pet category mix shifts .
  • Risks to monitor: Macro consumer confidence and value-seeking behavior, potential tariffs excluded from guidance, input cost inflation, and retailer private label dynamics in fruit snacks .
  • Near-term trading lens: Expect narrative driven by Q4 investment spend signals, cereal promo/media lift-through, and any early FY2026 innovation disclosures; Street estimate resets likely follow guidance cut until S&P consensus can be refreshed .