General Mills CEO Jeff Harmening Says Top Objective Continues To Be Health And Safety Of Stakeholders

General Mills Reports Fiscal 2020 Third-Quarter Results and Updates Full-Year Guidance

MINNEAPOLIS--(BUSINESS WIRE)--General Mills (NYSE: GIS) today reported results for the third quarter ended February 23, 2020.

“We began fiscal 2020 with three key priorities: accelerate our organic sales growth, maintain our strong margins, and reduce our leverage,” said General Mills Chairman and Chief Executive Officer Jeff Harmening. “Our focus and execution in a dynamic environment this year have kept us on track to achieve those goals. Our third-quarter results were broadly in line with our expectations, except for the negative impact in Asia of the COVID-19 virus outbreak.

“During the rapidly evolving situation related to COVID-19, our number one objective continues to be the health and safety of our consumers, employees, and other stakeholders. General Mills plays a critical role in making food to meet the needs of our consumers, and I’m proud of the way we’ve partnered with our retail customers in recent weeks to service consumers’ increased demand for food at home during this unique time. Looking forward, we’ll remain agile to adapt to changing demand patterns around the world as circumstances with COVID-19 continue to develop.”

Third Quarter Results Summary

• Net sales of $4.2 billion were flat to last year. Organic net sales were also flat to last year, with strong growth for the Pet segment largely offset by declines in North America Retail and Convenience Stores & Foodservice. A modest decline in organic volume was offset by favorable organic net price realization and mix. Third-quarter net sales results versus the prior year included a 50 basis-point headwind from lower Häagen-Dazs net sales in Asia in February, driven by the impact of the COVID-19 virus outbreak on consumer traffic in Häagen-Dazs shops and foodservice outlets.

• Gross margin declined 80 basis points to 33.6 percent of net sales. Adjusted gross margin of 33.9 percent was 30 basis points below the prior year, driven by input cost inflation and higher other supply chain costs, partially offset by Holistic Margin Management (HMM) cost savings and favorable net price realization and mix.

• Operating profit totaled $651 million, essentially in line with the prior year. Operating profit margin of 15.6 percent increased 10 basis points. Adjusted operating profit of $675 million was down 8 percent in constant currency, primarily driven by higher selling, general, and administrative (SG&A) expenses, including higher media investment. Lower contributions from ice cream net sales in Asia in February reduced third-quarter adjusted operating profit results versus the prior year by an estimated 150 basis points. Adjusted operating profit margin decreased 130 basis points to 16.1 percent.

• Net earnings attributable to General Mills totaled $454 million, up 2 percent from a year ago.

• Diluted EPS of $0.74 essentially matched prior-year results. Adjusted diluted EPS of $0.77 were down 6 percent from the prior year in constant currency, driven primarily by lower adjusted operating profit, a higher adjusted effective tax rate, and higher average diluted shares outstanding, partially offset by lower net interest expense and higher non-service benefit plan income. Lower contributions from ice cream net sales in Asia in February reduced third-quarter adjusted diluted EPS results versus the prior year by an estimated 150 basis points.

Nine Month Results Summary

• Net sales declined 1 percent to $12.6 billion. Organic net sales essentially matched year-ago levels, reflecting positive organic net price realization and mix offset by lower organic volume.

• Gross margin increased 80 basis points to 34.6 percent of net sales. Adjusted gross margin of 34.8 percent was 70 basis points above the prior year, driven primarily by favorable net price realization and mix and last year’s one-time purchase accounting inventory adjustment related to the Blue Buffalo acquisition, partially offset by higher input costs.

• Operating profit of $2.1 billion increased 18 percent from the prior year.

• Operating profit margin of 16.9 percent was up 270 basis points. Constant-currency adjusted operating profit increased 2 percent, driven by higher adjusted gross margin, partially offset by higher SG&A expenses including higher media investment. Adjusted operating profit margin increased 40 basis points to 17.2 percent.

• Net earnings attributable to General Mills totaled $1.6 billion.

• Diluted EPS of $2.54 was 30 percent above prior-year levels. Adjusted diluted EPS of $2.51 was up 5 percent on a constant-currency basis.

Convenience Stores & Foodservice Segment

Third-quarter net sales for the Convenience Stores & Foodservice segment declined 2 percent to $465 million, driven by declines on non-Focus 6 products including flour and mixes, partially offset by low-single digit growth for the Focus 6 platforms including cereal, frozen baked goods, and yogurt. Segment operating profit of $92 million was down 5 percent, primarily driven by higher input costs.

Through nine months, Convenience Stores & Foodservice net sales decreased 2 percent to $1.42 billion, due primarily to lower bakery flour volume and unfavorable index pricing, partially offset by low-single digit growth for the Focus 6 platforms. Segment operating profit of $298 million was down 2 percent, primarily driven by lower net sales.

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