General Mills posts profit rebound as margins recover
The packaged-foods company swung to a 27% jump in adjusted earnings after four quarters of declines.
The packaged-foods company General Mills (GIS) reported a sharp rebound in profitability in its fiscal fourth quarter, as gross and operating margins reversed year-earlier declines and organic sales returned to growth. Adjusted earnings rose 27% in constant currency to $0.95 a share.
The results marked the first quarter in four in which the company expanded margins year-over-year, a turnaround that management attributed to lower commodity costs and productivity gains. The improvement was most pronounced in the International segment, where operating profit surged 72% in constant currency, accelerating from 82% growth in the prior quarter.
Net sales reached $4.6 billion, up 1% from the year-earlier period, while organic sales were flat, a sequential improvement from the 3% organic decline in the same quarter of fiscal 2025. Volume trends also firmed: organic volume fell 2 points, an improvement from the 3-point decline in price and mix a year earlier.
By segment, North America Retail organic sales were flat, recovering from a 7% decline in the year-earlier quarter and a 4% drop in the third quarter. The International segment posted 3% organic growth, matching the pace of the year-earlier period, while North America Pet organic sales declined 3%, consistent with the prior quarter but down from 3% growth a year earlier. North America Foodservice operating profit rose 22%, rebounding from a 1% decline in the third quarter.
Gross margin expanded 240 basis points to 34.8%, reversing a 340-basis-point decline in the year-earlier quarter, while adjusted gross margin rose 150 basis points to 34.2%. Adjusted operating profit margin widened 160 basis points to 15.3%, recovering from a 330-basis-point contraction in the same quarter of fiscal 2025.
The company also disclosed a $3 billion cost-savings target by fiscal 2030, with $750 million expected in fiscal 2027. However, the quarter included a $1.8 billion non-cash goodwill impairment charge and a $1 billion non-cash valuation loss tied to a planned Brazil divestiture.
Looking ahead, General Mills guided fiscal 2027 organic net sales to a range of -1.5% to +0.5%, wider and more cautious than the -1% to +1% range provided a year earlier for fiscal 2026. Adjusted operating profit is expected to decline 13% to 8% in constant currency, and adjusted earnings are projected at $3.00 to $3.20 a share, down from $4.21 in fiscal 2025.