General Mills Reports Fourth-Quarter, Full-Year Fiscal 2018 Results; Provides 2019 Outlook

MINNEAPOLIS, June 27, 2018 -- General Mills reported results for the fourth quarter and full fiscal year ended May 27, 2018, that were in line with the company's most recent fiscal 2018 outlook. 

"Fiscal 2018 represented an important first step in returning our business to sustainable topline growth," said General Mills Chairman and Chief Executive Officer Jeff Harmening.  "We made significant progress toward competing more effectively this year, with strong innovation, marketing, and in-store execution driving positive organic sales growth in each of our last three quarters.  And we moved to reshape our portfolio for future growth with the acquisition of Blue Buffalo, a fast-growing, highly profitable business that is leading the transformation of the U.S. pet food category.  While our full-year profit results fell short of our initial plans, we finished the year delivering growth in sales, margins, profit, and EPS in the fourth quarter.  And I'm pleased with the continued progress we've made in cash generation, with our free cash flow up nearly 30 percent this year." 

Harmening continued, "As we turn to fiscal 2019, we'll continue to follow our Consumer First strategy and execute against our global growth priorities to further improve our topline momentum.  We are committed to competing effectively across all our brands and geographies, increasing investments to accelerate our differential growth platforms, and maximizing the growth opportunities for Blue Buffalo.  We are also keenly focused on maintaining our efficiency in this more inflationary cost environment, and we have initiatives underway to help protect our profitability." 

General Mills continues to pursue its Consumer First strategy and execute against its three key global growth priorities:  1) competing effectively on all brands and across all geographies through strong innovation, effective consumer marketing, and excellent in-store execution; 2) accelerating growth on its four differential growth platforms including Häagen-Dazs ice cream, snack bars, Old El Paso Mexican food, and its portfolio of natural and organic food brands; and 3) reshaping its portfolio through growth-enhancing transactions, including the recent acquisition of Blue Buffalo Pet Products, Inc. ("Blue Buffalo"), the leading brand in the fast-growing wholesome natural pet food category in the U.S.  The company also intends to pursue divestitures of growth-dilutive businesses to further reshape its portfolio.  By focusing on these priorities, General Mills expects to generate consistent topline growth, which, when balanced with a disciplined focus on margin expansion, cash conversion, and cash returns, should create significant value for shareholders. 

Fourth Quarter Results Summary 

• Net sales increased 2 percent to $3.89 billion. Organic net sales increased 1 percent, primarily reflecting benefits from organic net price realization and mix across all four operating segments, partially offset by lower organic volume in the North America Retail, Europe & Australia, and Asia & Latin America segments. 
• Gross margin increased 180 basis points to 36.5 percent of net sales. Adjusted gross margin, which excludes certain items affecting comparability, increased 70 basis points to 35.8 percent. This was driven by favorable net price realization and mix, as well as benefits from productivity initiatives including a newly implemented global sourcing program. 
• Operating profit totaled $561 million, down 8 percent from last year due to higher restructuring, impairment, and other exit costs. Operating profit margin of 14.4 percent decreased 160 basis points. Adjusted operating profit margin increased 170 basis points to 18.5 percent, reflecting higher adjusted gross margin and lower selling, general, & administrative (SG&A) expenses. 
• Total segment operating profit of $727 million was up 7 percent in constant currency. 
• Net earnings attributable to General Mills totaled $354 million, down 13 percent from a year ago, reflecting lower operating profit and higher net interest expense, partially offset by a lower effective tax rate. Diluted EPS totaled $0.59 compared to $0.69 in the prior year. 
• Adjusted diluted EPS, which excludes certain items affecting comparability of results, totaled $0.79 in the fourth quarter, up 8 percent from the prior year. Constant-currency adjusted diluted EPS increased 7 percent, driven by higher adjusted operating profit, partially offset by a 7-point headwind related to Blue Buffalo acquisition financing. 

Full Year Results Summary 

• Net sales increased 1 percent to $15.74 billion and organic net sales essentially matched year-ago levels. 
• Gross margin decreased 110 basis points to 34.5 percent of net sales. Adjusted gross margin was down 170 basis points to 34.4 percent. 
• Operating profit totaled $2.51 billion, down 2 percent from the prior year. Operating profit margin of 15.9 percent was down 50 basis points. Adjusted operating profit margin decreased 90 basis points to 17.2 percent. 
• Total segment operating profit of $2.79 billion was down 6 percent in constant currency. 
• Net earnings attributable to General Mills totaled $2.13 billion. Diluted EPS of $3.64 increased 31 percent from the prior year. 
• Adjusted diluted EPS of $3.11 was up 1 percent as reported and essentially matched year-ago levels on a constant-currency basis, including a 2-point headwind related to Blue Buffalo acquisition financing. 

Full Release