Shares of General Mills, Inc. (NYSE: GIS) were down over 2% on Wednesday after the company reported its earnings results for the second quarter of 2024. Earnings beat estimates while revenues fell short. The company also lowered its guidance for fiscal year 2024 as it anticipates a challenging business environment.
Mixed results
General Mills’ net sales decreased 2% year-over-year to $5.1 billion in Q2 2024, missing analysts’ projections of $5.3 billion. Organic net sales were also down 2%. The top line decrease reflected lower pound volume, which was partly offset by favorable net price realization and mix. The company delivered adjusted EPS of $1.25 for the quarter, which rose 14% from last year and surpassed estimates of $1.15.
Segment performance
The company saw net sales decline in its North America Retail and Pet segments during the second quarter due to lower pound volume, partly offset by price realization and mix. Sales fell 2% on both a reported and organic basis in the North America Retail division, with a mid-single-digit decline in US Snacks and US Morning Foods, and low-single-digit growth in US Meals & Baking Solutions.
For the second half of 2024, GIS expects North America Retail organic sales growth to be roughly in line with second quarter results. The company expects volume to improve modestly although this is expected to be offset by the deceleration of price/mix.
In the Pet segment, net sales and organic sales both decreased 4% as pet parents continue to seek value in a challenging macro environment. This is a headwind in particular for premium pet food. In Q2, the company saw sales declines in both dry and wet pet food while pet treats witnessed double-digit growth. General Mills expects organic net sales in the Pet segment to slow sequentially in the second half of 2024, mainly due to tough year-ago comparisons.
Sales in the North America Foodservice segment remained flat in Q2 compared to year-ago levels. International segment sales rose 2% on a reported basis but stayed flat on an organic basis in the second quarter. GIS expects organic net sales growth for both these segments to step up in the back half of the year.
Revised outlook
General Mills revised its outlook for fiscal year 2024 as it expects to see a slower volume recovery during the year. The company now expects organic net sales growth to range between down 1% to flat versus the previous range of up 3-4%.
Adjusted EPS is now expected to increase 4-5% in constant currency versus the prior range of 4-6%, reflecting the impact from lower organic sales growth. This impact from lower organic sales is expected to be largely offset by higher Holistic Margin Management (HMM) cost savings.