GENERAL MILLS INC Q1 FY2025 earnings call

• Macro environment played out as anticipated, with gradual improvement in categories. North America retail categories up a couple percent. - Focus on improving competitiveness, made progress in Q1 but more work needed. - Couponing and promotional investments saw good returns, with consumers valuing brands and products they trust. - Pet business showed improvement in Q1, with Wilderness seeing halving of losses and Blue Buffalo up mid-single digits. - Divestiture of American yogurt businesses, with plans to use proceeds for bolt-on acquisitions or share repurchases. - Six of 10 categories are flat or getting better, with focus on improving dough and snack categories, including new product launches and advertising in Q2.

North America retail categories were up a couple percent, with a mix of volume and pricing. Blue Buffalo was up mid-single digits. Wilderness saw halving of losses in the quarter. Foodservice and pet businesses saw improved customer service levels, with service levels moving close to pre-pandemic levels. Pet business showed progression in Q1, with dry pet food categories like Wilderness, Life Protection Formula, Tastefuls, and cat gaining shares.

• Anticipate gradual improvement in categories throughout the year. - Focus on continuing to improve competitiveness. - Balance sheet in good place, with proceeds from yogurt divestiture to be used for bolt-on acquisitions (in $1 billion to $2 billion range) or share repurchases. - Expect continued improvement in top line as we move through Q2 into the back half of the year, with profit also phasing to the back half.

• Macroeconomic factors and value-seeking behavior by consumers could impact performance. - Service level issues in some businesses, although gradually improving. - Challenges in the China market, particularly with Haagen-Dazs shops experiencing lower traffic, impacting profitability. - Volatility in scanner data due to timing of merchandising shifts.

Q: Does the shift in more at-home food consumption give more confidence in organic sales outlook or is the benefit muted by value-seeking behavior?

A: Quarter played out as anticipated, with North America retail categories up a couple percent. Continued focus on improving competitiveness. Slight uptick in at-home food consumption as expected, but guidance predicated on continued competitiveness improvement.

Q: Can you talk about receptivity from consumers to couponing and promotional activity?

A: Consumers see value in different ways. Couponing saw good returns. New products like Fruity Cheerios and advertising on Wilderness showed positive receptivity. Majority of brand news in second quarter due to seasonal factors.

Q: Anticipate holding share in NAR segment or is outcome overly optimistic?

A: First quarter played out as anticipated, with improvement in competitiveness but more market share gains needed. Q2 easier from sales standpoint with most brand news hitting in Q2.

Q: Where is improvement in customer service and roadmap?

A: Improved customer service gradually across most portfolio, acutely in Foodservice and pet businesses. Service levels moving close to pre-pandemic levels, with supply chain reliability improving.

Q: Progress in pet business, especially Wilderness?

A: Pet business improved in Q1, with Wilderness seeing halving of losses. Advertising started at end of Q1, reintroducing grain-free products and adjusting sizes. More improvement expected in Q2.

Q: Focus on bolt-on acquisitions and share repurchases?

A: Last fiscal year returned proceeds to shareholders via share repurchases. This year, focus on bolt-on acquisitions in $1 billion to $2 billion range. Balance sheet allows for both acquisitions and repurchases.

Q: How to read latest quad week data showing step backwards?

A: Quad week data due to timing of merchandising shifts, not a reflection of lack of progress. Confident in initiatives to get back to share and absolute growth.

Q: Price/mix outlook and M&A focus?

A: Price/mix forecast 3%-4%, with productivity savings to offset inflation. M&A focus on bolt-on acquisitions in categories where we have a competitive advantage and growth potential, both domestic and international.

Q: Food at home trends and impact on promotion/messaging?

A: Shift from away from home to at home is slight but broad based. Impact on retail business broad based. Continued investment in media and brands, with more brand support in Q2.

Q: International trends, especially China?

A: European business saw growth. Brazil improved due to pricing adjustments. China challenging due to low shop traffic, not an execution issue but macroeconomic.

Q: Integration of cereal and yogurt strategy and impact of yogurt divestiture?

A: Little broader implication on retailers or insights. Yogurt and cereal have some commonalities but are relatively separable from a business and manufacturing standpoint.

Q: Plan for categories not flat or getting better?

A: Focus on dough and snack categories. Refrigerated dough has advertising coming in Q2 with Doughboy, and fruit snacks have additional capacity and new products in Q2.