General Mills Profit Falls 67%, But Comparison Masks a Steadier Quarter

General Mills reported a 67 percent drop in quarterly profit on Wednesday, a decline the Minneapolis-based food maker attributed almost entirely to an accounting comparison against a one-time gain a year earlier, even as underlying sales pressure in its North American cereal and snack business persisted into a fourth straight quarter.

The maker of Cheerios, Betty Crocker baking mixes and Blue Buffalo pet food said in a filing with the Securities and Exchange Commission that net sales for its fiscal first quarter, ended August 30, came in at $4.4 billion, edging out Wall Street estimates, while adjusted earnings of 75 cents a share beat the roughly 72-to-73-cent consensus analysts had penciled in. The company reaffirmed its full-year targets, and shares moved only modestly in premarket trading.

The numbers

Reported net sales fell 3 percent from a year earlier, a decline the company said was driven entirely by last year's sale of its U.S. yogurt business; organic net sales, which strip out the effect of acquisitions and divestitures, were essentially flat. Operating profit of $634 million was down 63 percent, and diluted earnings per share of 74 cents were down 67 percent from $2.22 a year ago — both comparisons distorted by a $1.05 billion gain the company booked in the year-ago quarter when it completed the yogurt sale. On an adjusted basis, which excludes that gain and other one-time items, operating profit was down 11 percent and diluted earnings per share were down 13 percent in constant currency, according to the earnings release posted to the company's investor relations site.

Results varied sharply by division. North America Retail, the company's largest and highest-margin segment, saw net sales fall 7 percent to $2.4 billion and organic sales decline 3 percent, with segment operating profit down 15 percent on higher input costs and softer volume. The North America Pet segment, built around Blue Buffalo, held net sales roughly flat at $613 million as double-digit growth in cat food offset a high-single-digit decline in dog food, though segment profit still fell 12 percent. Smaller units fared better: North America Foodservice posted 4 percent organic growth and a 12 percent rise in operating profit, while the International segment grew organic sales 4 percent on strength in India, China and distributor markets. Net interest expense rose to $142 million from $133 million a year earlier, which the company attributed primarily to higher interest rates.

Pressure on packaged food

General Mills has spent much of the past two years trying to reverse a slide in shopper traffic across its cereal and snack aisles, running promotional pricing to defend market share while raising list prices elsewhere to offset input-cost inflation that the company said is now running at the high end of its expected 4-to-5 percent range. The stock has traded within a 52-week range of $31.75 to $51.33, and it changed hands around $35.22 before Wednesday's opening bell, according to a premarket dispatch from Investing.com — more than 30 percent below its 52-week high and near levels the shares have not traded at in roughly a decade.

Part of that pressure is industrywide. Packaged-food analysts have grown warier this year of companies exposed to shrinking snack and cereal consumption tied to the growing popularity of GLP-1 weight-loss drugs. Adoption of the medications has climbed to roughly 11 percent of U.S. adults, up from 3 percent in 2024, and grocery spending has fallen about 6 percent in households where someone uses one, according to an industry brief tracking the trend. That shift compounds a separate squeeze from the Federal Reserve's decision on September 16 to raise its benchmark interest rate a quarter point, to a range of 3.75 to 4 percent — the central bank's first increase since 2023, made explicitly to counter inflation that officials tied in part to elevated oil prices. Higher rates raise General Mills' own borrowing costs, as reflected in this quarter's larger interest expense, while also discouraging the discretionary grocery spending the company depends on.

The company's response has centered on a multiyear cost-cutting effort, the Holistic Margin Management program, paired with a global transformation initiative that together are expected to generate at least $750 million in savings this fiscal year. That push has already closed a pizza-crust plant in St. Charles, Missouri, and consolidated two pet-food plants in Joplin, Missouri, into a single existing facility there, moves the company previously said would cost roughly $82 million in restructuring charges, including severance for affected employees. Separately, General Mills completed the sale of its Brazil business on September 2, after the quarter closed, part of a broader effort to concentrate resources on core North American and international brands.

What happens next

Chief Executive Jeff Harmening told investors the results marked the start of a turnaround built around new product launches rather than further price cuts.

"We are off to an encouraging start in fiscal 2027, driving improved topline performance with stronger product innovation and renovation focused on the benefits consumers are looking for today. We are also executing with discipline in a volatile environment... Based on our progress and the actions underway, we remain confident in our ability to deliver our fiscal 2027 guidance."

General Mills left its full-year forecast unchanged: organic net sales are still expected to range from down 1.5 percent to up 0.5 percent, adjusted operating profit is expected to fall 8 to 13 percent in constant currency, and adjusted diluted earnings are expected to land between $3.00 and $3.20 a share. The company also reaffirmed a dividend of 61 cents a share, part of a streak of uninterrupted payouts stretching back 127 years, according to the company's most recent dividend declaration — a payout that, at Wednesday's share price, would carry an annualized yield of roughly 7 percent.

Investors will get a fuller picture of whether the strategy is working when General Mills reports second-quarter results in December, a period that includes the holiday baking season and typically accounts for a disproportionate share of its annual cereal and baking-mix sales. Until then, the company's shift toward protein- and fiber-focused reformulations and new packaging — explicitly framed by management as a response to changing consumer priorities — will be tested against a grocery aisle where shoppers are both more price-sensitive and, in a growing number of households, simply eating less.