General Mills, Inc. (NYSE:GIS) Q1 2024 Earnings Call Transcript

General Mills, Inc. (NYSE:GIS) Q1 2024 Earnings Call Transcript September 20, 2023

General Mills, Inc. beats earnings expectations. Reported EPS is $1.09, expectations were $1.08.

Operator: Greetings, and welcome to the General Mills Q1 Fiscal ’24 Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded on Wednesday, September 20, 2023. I would now like to turn the conference over to Mr. Jeff Siemon, VP of Investor Relations. Please go ahead.

Jeff Siemon: Thank you, Frank, and good morning, everyone. Thanks for joining us today for our Q&A session on our first quarter fiscal 2024 results. I hope everyone had time to preview our press release, listen to our 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 our current views and assumptions. 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 this morning with Jeff Harmening, our Chairman and CEO; Kofi Bruce, our CFO; and Jon Nudi, Group President for our North America Retail segment. So, let’s go ahead and get to the first question. Frank, can you please get us started?

See also 15 Biggest Agricultural Companies in the US and 30 Best Places to Visit in Mexico that are Beautiful and Safe.

Q&A Session

Operator: Thank you. [Operator Instructions] Our first question comes from Ken Goldman with JPMorgan. Please proceed.

Ken Goldman: Hi. Thank you. You mentioned that consumers have been shifting purchases to customers and channels, not necessarily tracked by Nielsen. I’m just curious, as this trend has taken place, have you seen any of your more traditional tracked customers, I guess, those [FDM] (ph), kind of leaning more into price to try and retain traffic and tonnage? And if they’re not yet, is this something maybe we might expect to see just given past history?

Jeff Harmening: So, Ken, this is Jeff Harmening. You’re right, we did see increased traction in non-measured channels in the first quarter, and we’d expect that to continue throughout the year. But Jon Nudi, why don’t you give a little color commentary on that?

Jon Nudi: Yeah, absolutely, Ken. So, we did see non-measured channels grow at a double-digit rate in the quarter, which obviously drove [RNS] (ph) ahead of movement a bit for NAR. As you look at traditional grocery, we’ve seen frequency up a bit, about 5%, but price points up dramatically versus pre-pandemic and we continue to invest in our SRM tools and, as a result of that, we don’t expect to see deep discounting. As we model, our retailers model, it just doesn’t add up at the end of the day. So, we are seeing a bit more frequency, but price points up versus pre-pandemic for sure.

Ken Goldman: Got it. And then, thank you for that. I guess, quickly the Street’s modeling, just looking at 2Q, low-single-digit organic sales growth. Is this kind of a reasonable range within the context if you’re not providing quarterly guidance? Just trying to get a little bit of color there, especially in light of scanner data, maybe suggesting that performance in NAR is heading downward a little bit in recent weeks. I just didn’t know if that’s what you were looking for.

Jon Nudi: Yeah, so…

Jeff Harmening: Yeah, Ken — go ahead, Jon.

Jon Nudi: Go ahead, Jeff.

Jeff Harmening: Yeah. So I think — first of all, you’re right, we’re not going to give guidance on a quarter either for the segment or for the company, but I will give you some — a little bit of color commentary on the year and the guidance, because I think that’s probably is important. I mean, importantly, as we look to 3% to 4% sales growth, I think it’s important to remember that — to know that we don’t really expect a huge rebound in our Pet business for the rest of this year and due to all the factors we’ve talked about. Yeah, I will say, as importantly our Foodservice business is growing nicely, and we see continued growth in that. And our International businesses is up really nicely as well. Yes, we had Häagen-Dazs recall that we were lapping and Häagen-Dazs responded nicely, up 20%.

That’s not the only thing growing. Our European business was up double-digits and growing 70% on our Bars business in France and our India business, our Distributor businesses are also growing. And so, I think it’s important to note that even while Pet didn’t quite meet our expectations for the first quarter, it’s going to be challenging this year. We have two other big segments that are going to do quite well. As it comes to NAR, we’re executing really well on NAR. I mean, our distribution is up, the quality of our merchandising are up, our new products are doing well. And you might say, “Okay, well, then what happened to share performance in the first quarter?” And I guess I just remind you that, our first quarter is our toughest from a share perspective given the pricing that we’re lapping and our competitors gains that they’ve made in getting their supply chains back up in order.

NARs were already really good, NARs are improving too. So, as we look at the rest of the year, in NAR, for those listening, we do expect our volumes to improve. Importantly, they don’t have to get to positive, they just have to improve from where they are now, and part of that is really going to be gaining share as pricing gets lapped, as the competition, comparisons get tougher and [indiscernible] get easier because of this supply chain challenges. And we think — look with all of that happening, as we continue to execute well, our NAR business will continue to get better throughout the year.

Jon Nudi: Yeah. And the only thing I might add some color on is on-shelf availability, so Jeff touched on that, and our on-shelf availability is better this year than last year, and that’s great. What’s remarkably different is, our competitors, and particularly private-label. So, if you look at private-label on-shelf availability in categories like grain and RBG, it’s up 10 points year-over-year. So, while that was a tailwind for us where we are on the shelf and private-label wasn’t, it’s a headwind this year. That comp gets better as we move throughout the year and that will help us as we expect to see sequential volume improvement.

Ken Goldman: Makes sense. Thanks so much.

Operator: Our next question comes from Robert Moskow with TD Cowen. Please proceed.

Robert Moskow: Hi, everybody. Thanks for the question. I wanted to know — I guess two questions. You had some very significant marketing investment in first quarter, but this is a very tough volume environment. And I wanted to know what’s your plan for marketing investment for the rest of the year? And do you have — would you keep the same amount of pressure on, or would you change tactics mid-year if you’re not getting the volume that you expected?

Jeff Harmening: Yeah, Rob, first of all, this is Jeff. Welcome back. Good to hear you again. And Kofi, you want to take this?