General Mills (NYSE:GIS) saw its stock climb 6.8% to $37.17 in late-morning trading Wednesday, outperforming both major staples rivals and the broader Consumer Staples Select Sector SPDR Fund (NYSEARCA:XLP), which slipped 0.2%. The rally came after the company reported fiscal fourth-quarter adjusted earnings per share of $0.95, well above the $0.80 estimate from analysts polled by LSEG as reported by Reuters.
While the headline earnings beat was significant, a closer look at the numbers reveals that the quarter's performance was heavily influenced by one-time factors. General Mills' 'bridge' analysis shows that trade expense timing alone added 7 percentage points to adjusted operating profit growth and lifted North America Retail operating profit growth by 9 points. Additionally, fiscal 2026 included a 53rd week, which boosted reported sales by approximately 7 percentage points in the fourth quarter.
Net sales for the quarter rose 1% to $4.6 billion, though organic sales remained flat year-over-year. Adjusted operating profit climbed 13% in constant currency, and adjusted EPS jumped 27% in constant currency. However, the contribution from timing factors suggests that underlying demand trends were less robust than the headline numbers imply.
The company's North America Retail segment, its largest, saw reported sales decline 4% to $2.5 billion, with organic sales flat as a 2-point benefit from trade expense timing and retailer inventory shifts offset weakness. Organic volume fell 2 points, while price/mix also subtracted 2 points. The Pet segment posted a 3% organic sales decline, while Foodservice was flat and International grew 3% organically.
Looking ahead, General Mills provided a cautious outlook for fiscal 2027. The company expects organic net sales to range from a decline of 1.5% to a gain of 0.5%, with adjusted operating profit falling 8% to 13% in constant currency. Adjusted EPS is projected to be between $3.00 and $3.20, down from the $3.55 expected for fiscal 2026. This forecast comes despite plans to cut at least $750 million in costs, part of a broader target of $3 billion in cumulative cost savings by fiscal 2030.
CEO Jeff Harmening emphasized that the company's price investment work is complete and that the focus will shift to innovation and renovation in the coming year. The cost savings program is substantial, with about $2 billion of the $3 billion target expected to come from the Holistic Margin Management productivity program, representing roughly 4% of annual cost of goods sold. The remainder will come from global transformation initiatives and supply chain efficiencies.
General Mills expects significant headwinds in fiscal 2027, including roughly 9 points of operating-profit pressure and 11 points of EPS pressure from lapping the 53rd week, incentive normalization, and divestitures. Free cash flow conversion is expected to be about 95% of adjusted after-tax earnings.
On the balance sheet, CFO Kofi Bruce indicated that the company is prioritizing debt reduction in the near term, with share buybacks primarily used to offset dilution. In fiscal 2026, General Mills paid $1.3 billion in dividends and repurchased $500 million of its own stock, down from $1.2 billion in buybacks the prior year.
General Mills shares had fallen approximately 25% in 2024 following a prior forecast cut, but the latest results and outlook have been viewed more favorably. Jefferies described the guidance as 'better than feared,' while eToro's Lale Akoner noted the company now has a 'clearer path' than in previous quarters. The stock's move Wednesday outpaced gains in other staples such as Kraft Heinz (NASDAQ:KHC), Campbell's (NASDAQ:CPB), Conagra (NYSE:CAG), PepsiCo (NASDAQ:PEP), and Mondelez (NASDAQ:MDLZ).
