General Mills, Inc. (GIS) Earnings Call Transcript & Summary

Hello, everyone. Thank you for joining us, and welcome to General Mills Fiscal 2026 Q4 Earnings Call. [Operator Instructions] I will now hand the conference over to Jeff Siemon, Vice President, Investor Relations and Corporate Finance. Jeff, please go ahead.

Thank you, Samantha, and good morning to everyone. Thanks for joining us today for our live Q&A session on our Q4 and full year fiscal '26 results. I hope you all had time to review our press release, listen to the prepared remarks and view our presentation materials, which we made available this morning on our Investor Relations website. It's important to note that in our Q&A session, we may make forward-looking statements that are based on management's current views and assumptions. So please refer to this morning's press release for factors that could impact forward-looking statements and for reconciliations of non-GAAP information, which may be discussed on today's call. I'm here with Jeff Harmening, our Chairman and CEO; Dana McNabb, our COO; and Kofi Bruce, our CFO. Now let me turn it over to Jeff for some opening remarks.

Thanks, Jeff, and good morning, everybody. Before we get going today, I thought I'd provide a brief summary of some of the main messages for today, really how we finished fiscal '26 and then where General Mills is headed in fiscal '27. And so recall, as we entered fiscal '26, we made a bold decision to reinvest in remarkability. And most importantly, I think, was adjusting our base prices across a meaningful part of our portfolio to strengthen the fundamentals of our business. And we certainly encountered some challenges this past fiscal year, including a more difficult consumer backdrop that impacted the pace and the cost of the volume improvement as well as some specific headwinds on a couple of key businesses, namely Totino's and Wilderness. I can confidently say that we exited the year with a stronger foundation with encouraging improvements in household penetration and base volume and innovation that gives us confidence as we look to the path ahead specifically to F '27. So I'm equally confident that fiscal '27 will be a better year for General Mills and our priorities for the coming year, I think, are quite clear. First, we're focused on improving our top line growth by driving a step change in the remarkability of our brands. Also importantly, with our base price investments behind us, we're shifting our focus more toward innovation and renovation to packaging and brand communication that deliver the benefits that matter most to today's consumers, supported by stronger price mix with a heavy emphasis on mix from premium innovation, price pack architecture and trade efficiency. And so whether it's Cheerios or Blue Buffalo or Haagen-Dazs or Annie's, we have really good plans going into fiscal '27 and meet consumers where they are on the brands and benefits that they deliver to their needs. And so second, as we accelerate and expand our enterprise transformation efforts to drive greater speed and efficiency and the flexibility across our business. We expect to deliver $3 billion in cumulative cost savings over the 4 years through fiscal 2030, primarily through our Holistic Margin Management productivity program and our global transformation initiative, and we're expecting $750 million to be delivered in fiscal '27. These savings are critical to help offset inflation to fund our growth investments and support stronger earnings and cash flow over time. And third, we will stay disciplined on capital allocation. Our focus is on driving cash flow, working on leverage and restoring profitable growth over time. While fiscal '27 will include elevated inflation and some mechanical headwinds, we believe the combination of stronger brand remarkability, sharper execution and a more aggressive productivity agenda positions us to build momentum and create sustainable shareholder value over the long term. And so with that, operator, can you go ahead and let's get started on Q&A.

[Operator Instructions] Your first question comes from the line of Max Gumport with BNP Paribas.

To start off, it seems like FY '27 represents a big pivot from price-based investments in FY '26 to innovation and renovation based investments focusing on offering consumers better-for-you attributes in FY '27. Can you talk about some of the learnings that inform this shift and your level of confidence that will deliver the results you're expecting?

Yes, Max, this is Jeff Harmening. Let me take that one. I would say what -- we always felt like we would be pivoting based on where we started last year. Recall last year, I talked about it kind of being a 2-step process. The first thing we had to do was to get our base pricing back in line, not necessarily equal competition or anything like that, but really making sure we are under key price cliffs and price thresholds. And the job to do last year when we talked about remarkability was really about value. And we have effectively done that. But that's kind of only the first step in a 2-step process to get us back to profitable organic volume growth. And the second step really is with that foundation behind us, and it worked as we thought it would work, is to make sure now it allows the rest of our marketing to work even better. And Dana and her team have done a really nice job improving brand communications and packaging and price mix and new product innovation, renovation. And so all those things work a lot better when you get your base pricing. So yes, it's a pivot from what we did, what we talked about last year, but that's only because we did the work last year. And I'm really glad that we did that we increased household penetration for the first time in a number of years. We increased our pound share and NAR. We were competitive in the other 3 segments. And so the work we're doing this year, honestly, is only -- we can only do it because of the work that we had done last year, and I'm pleased with how we have done that and even more pleased with the innovation we have coming ahead of us.

Great. And then just as a follow-up. So last year, like others in the industry, you saw your fiscal year get dented a bit by changes in the macro environment, specifically consumers during the middle of the fiscal year started to demonstrate an increased propensity to [ wait ] to buy product on promotion. I'm wondering, one, have you seen that behavior dissipate? And then two, what's the level of flexibility that you've embedded in your outlook for FY '27 for other such unexpected changes in consumer behavior?

Well, why don't I take that question? Max, thanks for that. What we are anticipating is that as we go into this new fiscal year, the consumer is going to continue to be pressured. And we do expect to see them continue to change their behavior because of that, be more deliberate in how and where they shop, buying more on promotion and less on everyday prices, making trade-offs between pack sizes and channels, all with value at the forefront. And actually, as we exited our Q4, we saw categories slow down by about 1 point. And so as we go into this fiscal year, we're not anticipating that to change. We expect the current consumer and category backdrop will continue. But even as we say that, we know that consumers are still willing to pay for benefits that matter most to them, think functional nutrition, bold flavors, et cetera. And so for me, this really reinforces the importance of our focus on remarkability. And when we do that well, like on Cheerios Protein or renovated Chex Mix snacks or Tastefuls and Tiki Cat offerings, we can unlock growth even in this more challenging consumer environment. So again, as we look ahead, our assumption is the consumer will remain pressured, and we'll stay focused on the levers that we can control.

Your next question comes from the line of Peter Grom with UBS.

I kind of wanted to start with maybe a bigger picture question and just ask on the category outlook. It just feels like we've been talking about growth below long-term trends for a while. So as you think about what you're seeing from a category standpoint, do you continue to view this as simply cyclical dynamics? Or as these trends continue, is there may be some view that maybe long-term category growth rates may not be as applicable moving forward?

Yes. I mean let me take that one. This is Jeff. There are some trends that we know are long term in nature. Things are kind of undeniable. I think about demographics, for example, and 55-plus consumer base growing or increasing Hispanic population in the U.S. or pet humanization, which 25 years in is probably a trend. I mean so there are things like that, that are ever lasting. There are other things that are certainly cyclical in nature. Consumers always cared about things like their food tasting good and being good for them and value and convenience. But those definitions change over time. E-commerce is kind of the new convenience. We know consumers care a lot about value, which is why the base pricing worked so well last year. They care about health, and now it's really all about protein. And the question is how long will all of these things last? And the answer is really kind of a notable in a volatile environment. And so what we do know, though, is that our focus this coming year on driving improved organic growth and doing it profitably is the right path. And I have confidence in our plans. Dana mentioned Cheerios Protein and that's off to a great start. She managed -- as she talked about Tiki Cat, which really is about pet humanization, which is growing quite nicely as well. And she also talked about bold flavored Chex Mix, which is doing well. And so all those things that she talked about really resonate with today's consumers and kind of where we are. What it looks like over time, we will see. But our focus is squarely over the next 12 months and continuing to make progress using remarkability.

That's really helpful. And then just maybe just some perspective on the phasing of organic sales growth. You mentioned below in the first quarter. Any way to put some guardrails on how much below the full year guidance you would expect to start the year? And then just any thoughts on how you see that evolving as we progress through the year as well?

Sure. This is Kofi. So let me just start by saying I'm probably not going to satisfy your question because I don't want to get too much more specific, I'm getting the habit of providing quarterly guidance, other than just reiterate kind of what we said in our prepared remarks. We would expect the shipment timing headwinds on Pet to continue into Q1. But we would expect some reversal on North America retail as we step into Q1. Those will have both top and bottom line implications, obviously, versus expectations. And then as a reminder, we divested yogurt on this end of June, last fiscal year, so fiscal '26. And so that will be a comparison headwind along with the fact that we would expect our cost savings, i.e., our net inflation, the impact of inflation, net of all of our cost savings initiatives to be negative and progressively improve as we move through Q2 and into Q3 and the back half. So other than that, I wouldn't get too much more specific.

Your next question comes from the line of Andrew Lazar with Barclays.

Jeff, I was wondering, I guess, what should our expectations be around both sort of volume share and value share as we sort of move through this year? I know that -- I guess, the sort of transfer from volume to sort of value share is really the key point in a lot of the work that you did last year around the price points and such. So trying to get a better sense of what your expectation is, so we can kind of track that in market data and whatnot as we move forward.

Yes. I mean I think for us, Andrew, you're right. This past year, we focused on volume share and NAR, I would say. We focus on dollar share in the other 3 segments, but on NAR we focused on pound share because of the pricing actions that we took. And so having those largely behind us as we enter this new year, my -- our goal is going to be to make sure that we're competitive across dollar share across all 4 of our segments. And that doesn't mean we completely abandon what we do with pounds. There's always a mix. And I'd like to say, we like to stay in the middle of both. And I think the same would hold true on pound and dollar share as we enter this year. And so it's not as if we're abandoning one and looking at the other. Our job is to do both, it's continue to grow household penetration and generate the price mix we're looking for so that we're competitive on a dollar basis. And so as we look at this year, we want to make sure whether it's in NAR or whether it's in Pet or Foodservice or International that we're competitive on a dollar basis. And that doesn't mean we're completely abandon what we think of pounds, but the job to do really is as we pivot to the innovation we have, the renovation and the price mix, which is heavily focused on mix, really we'll be looking for dollar competitiveness.

Got it. And specific to NAR on dollar share, I guess as you think about where some of the share weakness has gone. It doesn't seem like private label is kind of that big a factor in this. And then I guess it's more, just by looking at what the other options are with some of these smaller insurgent players and things of that nature. What's -- as you diagnose like where some of that share has gone? And then all the work you're doing this year to step up the remarkability work to try and sort of counter that. How do you see that dynamic playing out? And how the work you're doing can address that more fully?

Andrew, thank you for the question. As I look at NAR and think about remarkability, when we were sitting here on this call last year from a share perspective, we had seen private label get stronger in pretty much all of our categories. They were stealing share. And we also saw a small brand stealing share. And we were squarely in the middle and had to take action in order to become more competitive. And as we diagnosed where we were struggling the most, it was really on affordability and value. And so that's why in fiscal '26, we focused on remarkability with most of our investment on price. And we saw it work. That was about fixing our base volume. Sitting here last year, we were looking at base volume, which is our most profitable volume, it was down about 10%. Now we're entering the year with our base volume where we invested on price, up about 1%, and we have household penetration growth. So we are entering this fiscal year with a much stronger foundation. And now it is all about making sure that we are delivering the benefits that consumers are willing to pay for. So making a significant step-up in innovation, in renovation, in packaging, in terms of format and functionality, which will allow us to get a modest improvement in price mix and emphasis on that is on mix, and that will be a difference maker in terms of our ability to improve dollar share performance. So I'm confident that we will see improved organic sales results in NAR as we go into next year.

Your next question comes from the line of Tom Palmer with JPMorgan.

Maybe I could move off the sales line a little bit and ask on the cost savings. The $3 billion in planned savings over the next 4 years. I think elements of the savings that were laid out were maybe already in place, although maybe not fully quantified. So could you maybe provide a little bit of detail on kind of what pieces such as HMM were kind of underway and maybe to an extent already embedded in your expectations versus the pieces that are new and we should kind of look to ramp over the next 4 years?

Thanks for the question. I think as we talk about transformation, we have to start first with reminding everyone that our primary goal is to restore profitable organic sales growth. And all of our cost-saving efforts are in service to that goal. So when you look at the $3 billion, we have approximately $2 billion of that, that's expected to come from HMM. And that really is at a rate consistent with what we've delivered over the past few years. HMM is a really strong capability. Our commercial teams lead. It's about understanding what the consumer values and putting back in what they do value and taking out what they don't value. And so that's something that's been consistent over the years. The other $1 billion is expected to come from the acceleration that we've talked about from our global transformation initiative and other cost saving actions. And that's really about improving our end-to-end business processes and identifying new ways of working when you think about new tools, technology, operating models to be more agile. So one of those areas that we talked about on the prepared remarks that we're thinking about is our supply chain transformation. And I really want to emphasize that our supply chain is truly, I think, the best in food, very good at what they do. But our supply chain was also built for a different time, a little bit lower volume. We've seen that we need faster innovation, more packaging flexibility. And so it's really about thinking how do we reimagine the supply chain for the future so we can get that profitable growth. And we are still really in the early phases of this design. So we don't have more to share, but we will come back and share more as we get more details.

Thanks for that detail, Dana. I also wanted to ask on cost inflation expectations. It is a dynamic environment, obviously, on the fuel side. How did you, I guess, make your assumptions here just on how the year progresses from an inflation standpoint? How you're assuming kind of fuel costs look? And then how much visibility versus -- given hedges and things like that versus assumptions are embedded in that 4% to 5%?

Sure. This is Kofi. Just to give some perspective, our inflation outlook of 4% to 5% assumes about $100 a barrel on oil on the uncovered portion of the year and conversion cost based on a lagging PPI. So we're covered about 8 to 9 months out. So the uncovered portion of the year is relatively small. We're fairly locked in. What I would say is that as we work our way through the year, we would expect that any meaningful change in oil on its own would fall within that range of our guidance, just given the amount that we've got covered through the year.

Your next question comes from the line of David Palmer with Evercore ISI.

Just a follow-up on your previous comments on dollar market share trend, which you anticipate improving in fiscal '27. Any more specifics you can offer on that? What sort of dollar category growth do you think will happen this year? And do you anticipate mills starting to grow in line with the category by the end of the fiscal year? Is that what's baked into your guidance? And I have a follow-up.

So thank you for the question. I don't think that I will predict dollar share on all of our categories. That would probably get me into trouble. But as we said in our prepared remarks, we're assuming our categories will track roughly in line with F '26. And for NAR, that's roughly flat in dollars. So we expect to deliver improved NAR retail sales performance with a combination of remarkability. We do think that we'll see some modest price mix because remember, price mix was a real headwind for us this year, and that will help us from a dollar share perspective. And then again, this modest price mix is going to be driven entirely by mix. And with packaging formats, innovation, renovation. I also think when you look at our dollar share performance for NAR, you can miss the fact that Totino's was a real problem for us this year. We just didn't execute the way that we need to or at our standard. We had a price pack architecture conversion that wasn't great. We didn't have the innovation that we needed to. And so going into fiscal '27, we've improved almost every lever of remarkability. We have a strong merchandising now. We've got this price pack architecture fixed. We have really good innovation, think Blasted Totino's Rolls Ultimate Pizza that's doing really well. And then in the frozen segment, we see Asian snacks and Mexican snacks growing really well. So we're launching an Old El Paso frozen snack. We have Wanchai Ferry that's coming over. And so I feel like we've diagnosed that business well. We're already seeing an improvement into June. Now 4 weeks is not necessarily a trend, but we've improved our hot snacks trend by 1 point and our pizza trend by almost 5 points. And just stabilizing that as if alone, we're not going to turn around overnight, but stabilizing that alone is going to have a big impact on our dollar share performance.