General Mills (GIS) Q4 2026 Earnings Call Transcript

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DATE

Wednesday, July 1, 2026 at 9:00 a.m. ET

CALL PARTICIPANTS

• Vice President, Investor Relations and Corporate Finance - Jeff Siemon
• Chairman and Chief Executive Officer - Jeffrey L. Harmening
• Chief Operating Officer - Dana McNabb
• Executive Vice President and Chief Financial Officer - Kofi A. Bruce

TAKEAWAYS

• Net Sales -- $4.6 billion in the fourth quarter, representing a 1% increase driven by a 7-point benefit from the 53rd week and a 1-point benefit from foreign currency, partially offset by a 7-point headwind from divestitures.
• Organic Net Sales -- Flat in the fourth quarter, reflecting a 1-point benefit from favorable trade expense timing offset by volume declines.
• Adjusted Diluted EPS -- $0.95 in the fourth quarter, increasing 27% in constant currency due to higher adjusted operating profit, a lower tax rate, and fewer shares outstanding.
• Operating Loss -- $2.1 billion in the fourth quarter, compared to a profit of $504 million last year, primarily reflecting $1.8 billion in non-cash goodwill and brand impairment charges and a $1.0 billion valuation loss related to the Brazil business divestiture.
• North America Retail (NAR) Net Sales -- $2.5 billion in the fourth quarter, declining 4% as reported but finishing flat on an organic basis despite a 10-point divestiture headwind.
• North America Pet Net Sales -- $702 million in the fourth quarter, increasing 4% as reported, though organic net sales declined 3% due to changes in retailer inventory and customer mix.
• International Net Sales -- $858 million in the fourth quarter, up 16% as reported and 3% on an organic basis, with growth led by Brazil, Europe, India, and China.
• North America Foodservice Net Sales -- $575 million in the fourth quarter, down 1% as reported but flat organically, including a 2-point headwind from index pricing on bakery flour.
• Cost Savings Target -- $3 billion in cumulative savings expected through fiscal 2030, with $750 million targeted for delivery in fiscal 2027.
• Fiscal 2027 Organic Net Sales Guidance -- Range of down 1.5% to up 0.5%, assuming category growth remains below long-term historical rates.
• Fiscal 2027 Adjusted Operating Profit Guidance -- Expected to decline between 8%-13% in constant currency from the $2.8 billion base in fiscal 2026.
• Fiscal 2027 Adjusted Diluted EPS Guidance -- Target range of $3.00 to $3.20 per share, reflecting headwinds from lapping the 53rd week and higher incentive compensation.
• Full-Year Net Sales -- $18.4 billion for fiscal 2026, a 5% decline reflecting a 6-point headwind from divestitures and a 2-point benefit from the 53rd week.
• Gross Margin -- 34.8% in the fourth quarter, up 240 basis points, driven by favorable price realization, mix, and mark-to-market effects.
• Input Cost Inflation -- 4%-5% net inflation anticipated for fiscal 2027, with the company currently covered for the next 8-9 months.
• Pet Segment Inventory -- 2-point gap between organic sales and retail sales in Q4 attributed to customer mix, with e-commerce and mass retailers holding less inventory than traditional channels.
• Free Cash Flow Conversion -- 85% of adjusted after-tax earnings for the full year, with a target of approximately 95% for fiscal 2027.
• Pet Impairment Charges -- $1.5 billion non-cash goodwill impairment charge for the North America Pet reporting unit and $250 million for Nudges and True Chews brands.
• Share Repurchases -- $500 million in fiscal 2026, compared to $1.2 billion in the prior year, as the company prioritized capital discipline and leverage.
• Cheerios Protein -- Management reported this sub-brand has reached $100 million in sales, representing a successful application of the company's innovation strategy.

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RISKS

• Bruce stated, "we would expect our cost savings... net of all of our cost savings initiatives to be negative," noting that inflation pressure will initially outpace productivity gains in the first half of fiscal 2027.
• Harmening stated, "we certainly encountered some challenges this past fiscal year, including a more difficult consumer backdrop that impacted the pace and the cost of the volume improvement," specifically citing headwinds in the Totino's and Wilderness businesses.
• McNabb noted that for the Pet segment, they expect a "low single digit headwind from the retail inventory in FY 2027," driven by shifting customer mix toward lower-inventory channels like e-commerce.

SUMMARY

Management reported that fiscal 2026 concluded with adjusted results meeting internal expectations despite significant non-cash impairment charges related to the Pet segment and the planned divestiture of the Brazil business. The company is transitioning from a period of heavy base-price investments intended to restore value and household penetration to a focus on brand remarkability and innovation for fiscal 2027. This strategic pivot aims to drive organic volume growth through product renovation and premium offerings like high-protein options, while simultaneously launching a global transformation initiative to extract $3 billion in costs over the next four years. While the consumer environment remains pressured, General Mills expects its productivity programs and marketing investments to offset persistent input cost inflation and the absence of the 53rd week benefit seen in the prior fiscal year.

• CEO Harmening noted that the focus for fiscal 2027 is a "step change in the remarkability of our brands" through innovation, renovation, and brand communication following the completion of base pricing adjustments.
• COO McNabb reported that the Totino's business experienced execution challenges in fiscal 2026, including a "price pack architecture conversion that was not great," but noted stabilization in hot snacks and pizza trends during June.
• The company identified a permanent headwind in the Pet segment from customer mix, as faster-growing e-commerce and mass channels carry significantly less inventory than traditional retail customers.
• CFO Bruce indicated that fiscal 2027 profitability will be weighted toward the second half as the impact of inflation net of cost savings is expected to be negative in the first quarter.
• Management confirmed an "always on" capability for M&A but stated the current bar for acquisitions is "very, very high" as the company prioritizes organic growth and debt reduction.
• The $3 billion cost savings target includes approximately $2 billion from the established Holistic Margin Management program and $1 billion from a new global transformation initiative focused on supply chain and business process efficiency.
• Management cited specific product successes including Love Made Fresh, which grew 80% in the final quarter, and the launch of Old El Paso frozen snacks to capitalize on Asian and Mexican snack category growth.

INDUSTRY GLOSSARY

• HMM (Holistic Margin Management): A General Mills productivity program designed to reduce costs throughout the supply chain to fund brand reinvestment.
• Remarkability: A company-specific term for its strategic framework focusing on product quality, packaging, brand communication, and consumer value.
• NAR (North America Retail): The company's largest reporting segment, consisting of retail sales across the United States and Canada.
• Constant Currency: A financial calculation that excludes the effects of foreign exchange rate fluctuations to compare underlying performance between periods.
• Price-Pack Architecture: The strategic selection of package sizes and price points offered to consumers to maximize value and appeal across different income levels.

Full Conference Call Transcript

Operator: Hello, everyone. Thank you for joining us, welcome to General Mills fiscal 26 Q4 earnings call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star, 1. To raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Jeff Siemon vice president, investor relations and corporate finance. Jeffrey, please go ahead.

Jeff Siemon: Thank you, Samantha, and good morning to everyone. For joining us today for our live Q&A session on our Q4 and full year fiscal 2026 results. I hope you all had time to review our press release, listen to the prepared remarks, and view our presentation materials, which we made available this morning on our Investor Relations website. it is important to note that in our Q&A session, we may make forward looking statements that are based on management's current views and assumptions. So please refer to this morning's press release for factors that could impact forward looking statements. And for reconciliations of non GAAP information may be discussed on today's call. I am here with Jeffrey L.

Harmening, our chairman and CEO, Dana McNabb, our COO, Kofi A. Bruce, our CFO. Now, let me turn it over to Jeffrey for some opening remarks.

Jeffrey L. Harmening: Thanks, Jeffrey, and good morning, everybody. Before we get going today, I thought I would provide a brief summary of some of the main messages for today. Really how we finish fiscal 2026, and then where General Mills is headed in fiscal 2027. And so recall, as we entered fiscal 26, we made a bold decision to reinvest in Remarkability. And most importantly, I think, was in adjusting our base prices across a meaningful part of our portfolio to strengthen the fundamentals of our business.

And we certainly encountered some challenges this past fiscal year, including a more difficult consumer backdrop that impacted the pace and the cost of the volume improvement, as well as some specific headwinds on a couple of key business namely Totino's and Wilderness, I can confidently say that we exit the year on a strong-- with a stronger foundation with encouraging improvements in household penetration and base volume and innovation that gives us confidence as we look to the path ahead, specifically to fiscal 2027. So I am equally confident that fiscal 2027 will be a better year for General Mills. And our priorities for the coming year, I think, are quite clear.

First, we are focused on improving our top line growth. By driving a step change in the remarkability of our brands. Also importantly, with our base price investments behind us, we are shifting our focus. More toward innovation and renovation to packaging and brand communication. That deliver the benefits that matter most to today's consumers supported by stronger price mix with a heavy emphasis on mix. Premium innovation, price back architecture, and trade efficiency. And so whether it is Cheerios or Blue Buffalo or Haagen Dazs or Annie's, we have really good plans going into fiscal 2027 to meet consumers where they are. On the brands and benefits that deliver to their needs.

And so second, as we accelerate and expand our enterprise transformation efforts, to drive greater speed and efficiency and the flexibility across our business We expect to deliver $3 billion in cumulative cost savings over the 4 years through fiscal 2030. Primarily through our holistic margin management productivity program and our global transformation initiative. And we are expecting $750 million to be delivered in fiscal 2027. These savings are critical to help offset inflation, to fund our growth investments, and support stronger earnings and cash flow over time. And third, we will stay disciplined on capital allocation. Our focus is on driving cash flow, working on leverage, and restoring profitable growth over time.

While fiscal 27 will include elevated inflation and some mechanical headwinds, we believe the combination of stronger brand remarkability sharper execution, and a more aggressive productivity and agenda positions us to build momentum and create sustainable shareholder value over the long term. And so with that, operator, can you go ahead and let's get started on Q&A.

Operator: Thank you. Will now begin the question-and-answer session. Please limit yourself to 1 question and 1 follow-up. A reminder, if you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Max Andrew Gumport with BNP Paribas. Max, your line is open. Please go ahead.

Max Gumport: Hey. Thanks very much for the question. To start off, it seems like FY27 represents a big pivot from price based investments in FY 2026. To innovation and renovation based investments focusing on offering consumers better for you attributes in FY 2027. Can you talk about some of the learnings that informed this shift and your level of confidence that will deliver the results you are expecting? Thanks very much.

Jeffrey L. Harmening: Leah, Max. This is Jeffrey L. Harmening. Let me let me take that 1. I would say what we always felt like we would be pivoting based on where we started last year. Recall last year, you know, I talked about it kind of being a 2-step process The first thing we had to do was to get our base pricing back in line. Not necessarily, equal competition or anything like that, but really making sure we were under key price cliffs and price thresholds. And the job to do last year when we talked about remarkability was really about value. And we have effectively done that.

But that is kind of only the first step in a 2-step process to get us back to profitable organic volume growth. And the second step really is with that with that foundation behind us, and it worked as we thought it would work, is to make sure now it allows the rest of our marketing to work even better. And Dana and her team, have done a really nice job improving brand communications and packaging and price mix and new product innovation, renovation. And so all those things work a lot better when you get your base pricing.

So, yes, it is a it is a it is a it is a pivot from what we did what we talked about last year, but that is only because we did the work last year. And I am really glad that we did that. We increased household penetration for the first time in a number of years. We increased our pound share in NAR. We were competitive in the other 3 segments.

And so the work we are doing this year, honestly, is only we can only do it because of the work that we had done last year, and I am pleased with how we have done that and even more pleased with the innovation we have coming up. Ahead of us.

Max Gumport: Great. And then and then just as a follow-up, So last year, like others in the industry, you saw your fiscal year get pented a bit by changes in the environment, specifically consumers during the middle of the fiscal year. Started to demonstrate an increased propensity to wait to buy product on promotion. I am wondering, 1, have you seen that behavior dissipate? And then 2, what is the level of flexibility that you have embedded in your outlook for FY 2027 for other such unexpected changes in consumer behavior. Thanks very much. I will leave it there.

Dana McNabb: Well, why do not I take that question? Good morning, Max. Thanks for that. What we are anticipating is that as we go into this new fiscal year, the consumer is going to continue to be pressured. And we do expect to see them continue to change their behavior because of that. Be more deliberate in how and where they shop, buying more on promotion and less on everyday prices, making trade offs between pack sizes and channels, all with value at the forefront and actually, as we exited our Q4, we saw categories slow down by about 1 point. And so as we go into this fiscal year, we are not anticipating that to change.

We expect the current consumer and category backdrop will continue. But even as we say that, we know that consumers are still willing to pay for benefits that matter most to them. Think functional nutrition, bold flavors, And so for me, this really reinforces the importance of our focus on remarkability. And when we do that well, like Ontario's protein or renovated Chex Mix snacks or Tastefuls of Tiki Cat offering. We can unlock growth even in this more challenging consumer environment. So again, as we look ahead, our assumption is the consumer will remain pressured and will stay focused on the levers that we can control.

Max Gumport: Okay. Thanks very much.

Operator: Your next question comes from the line of Peter Grom with UBS.

Peter Grom: Peter, your line is open. Please go ahead. Thank you, operator, and good morning, everyone. I kind of wanted to start with maybe a bigger picture question and just you know, ask on the category outlook. It just feels like we have been talking about growth below long term trends for a while. So you think about what you are seeing from a category standpoint, do you continue to view this as simply cyclical dynamics? Or as these trends continue, is there maybe some view that maybe long term category growth rates may not be as applicable moving forward.

Jeffrey L. Harmening: Leah. I mean, let me let me take that 1. This is Jeffrey. You know, I look. There are there are some trends that we know are long term in nature. Things are kind of undeniable. I think about demographics, for example, and 55 plus consumer base growing or increasing Hispanic population in The US or pet humanization, which, you know, 25 years in is probably a trend. I mean, so there are things like that are everlasting. There are other things that are certainly cyclical in nature. Consumers have always cared about things like their food taste good and being good for them and value and convenience. But those, you know, those definitions change over time.

You know, e commerce is kind of the new convenience. We know consumers care a lot about value, which is why the base pricing worked so well last year. Karen about health, and now, you know, it is really all about protein. And, you know, the question is how long will all these things last? And the answer is really kind of unknowable in a volatile environment. So what we do know, is that our focus this coming year on driving improved organic growth and doing it profitably is the right is the right path. And I have confidence in our plans. Dana mentioned that, you know, Cheerios protein and you that is off to a great start.

She mentioned-- she talked about tiki cat, which really is about pet immunization, which is growing quite nicely as well. And she also talked about bowl flavor checks mix, which is doing well. And so all those things that she talked about really resonate with today's consumers and kind of where we are. What it looks like over time, we will see. But our focus is squarely over the next 12 months and continuing to make progress. Using Remarkability.

Peter Grom: that is really helpful. And then just maybe just some perspective on the phasing of organic sales growth. You mentioned below in the first quarter, any way to put some guardrails on how much below the full year guidance you would expect to start the year? And then just any thoughts on how you see that evolving as we progress through the year as well? Thank you.

Kofi A. Bruce: Sure. This is Kofi. So let me let me just start by saying I am I am probably not gonna satisfy your question because I do not wanna get too much more specific and get into the habit of providing quarterly guidance other than just reiterate kind of what we said in our prepared remarks, we would expect the shipment timing headwinds on PET to continue into Q1 We would expect some reversal on North America retail. As we step into Q1. Those will have both top and bottom line implications, obviously, versus expectations. And then as a reminder, we divested yogurt at the end of June last fiscal year, so fiscal 26.

And so that will be comparison headwind along with the fact that we would expect our cost savings. Our net inflation the impact of inflation net of all of our cost savings initiatives to be negative and progressively improve as we move through Q2 and into Q3 in the back half. So other than that, I would not get too much more specific. Great.

Peter Grom: Thanks so much. Pass it on.

Operator: Your next question comes from the line of Andrew Lazar with Barclays. Andrew, your line is open. Please go ahead.

Andrew Lazar: Great. Thanks so much. Good morning, everybody. Jeffrey, I was wondering, I guess, what should our expectations be around both sort of volume share and value share? As we sort of move through this year. I know that the I guess, sort of transfer from volume to sort of value share is really the key point in a lot of the work that you did last year around the price points and such. So trying to get a better sense of what your expectation is so we can kind of track that in the in market data and whatnot as we move forward. Thanks so much.

Jeffrey L. Harmening: Leah. I mean, I think for us, Andrew, you know, you are right. This past year, we focused on volume share in NARA, I would say. We focus on dollar share in the other 3 segments. But in NAR, we focused on pound share because of the pricing actions that we took. And so having those you know, largely behind us as we enter this new year, my our goal is gonna be to make sure that we are competitive across dollar share, across all 4 of our segments. And, that does not mean we completely abandon what we do on pounds. there is always a mix.

And I like to say we like to stay in the middle of the boat and I think the same would hold true on pound and dollar share as we as we enter this year. So it is not as if we are abandoning 1 and looking at the other. Our job is to do both, is to continue to grow household penetration and generate the price mix we are looking for so that we are competitive on a dollar basis.

And so as we look at this year, we wanna make sure whether it is in NAR or whether it is in Penn or food service or international that we are competitive on a dollar basis, and that does not mean we will come completely abandon what we think of on pounds. But our job to do really is as we pivot to the innovation we have, the renovation, and the price mix, which is heavily focused on mix, really what we are looking for dollar competitiveness.

Andrew Lazar: Got it. And specific to NAR, on dollar share, I guess, as you think about where some of the share weakness has gone. It does not seem like private label is that big a factor in this. And then I guess it is more, you know, just by looking at what the other options are. Some of these smaller you know, insurgent players and things of that nature.

Like, what is as you diagnose, like, where some of that share has gone, and then all the work you are doing this year to step up the Remarkability work to try and sort of counter that How do you see that dynamic, you know, playing out and how the work you are doing can address that? More fully. Thank you.

Dana McNabb: Hi, Andrew. Thank you for the question. As I look at NAR and think about Remarkability, when we were sitting here on this call last year, from a share perspective, we had seen private label get stronger in pretty much all of our categories. They were stealing share. And we also saw small brands stealing share, and we were squarely in the middle. And had to take action in order to become more competitive. And as we diagnosed where we were struggling the most, it was really on affordability and value. And so that is why in fiscal 26, we focused on Remarkability with most of our investment on price. And we saw it work.

That was about fixing our base volume. Sitting here last year, we were looking at base volume, which is our most profitable volume. It was down about 10%. Now we are entering the year with our base where we invested on price up about 1%, and we have household penetration growth. So we are entering this fiscal year with a much stronger foundation. And now it is all about making sure that we are delivering the benefits that consumers are willing to pay for. So making a significant step up in innovation, in renovation, in packaging in terms of format, and functionality, which will allow us to get a modest improvement in price.

And the emphasis on that is on mix. And that will be a difference maker in terms of our ability to improve dollar share performance. So I am confident that we will see improved organic sales results in NARA as we go into next year.

Andrew Lazar: Thank you.

Operator: Your next question comes from the line of Tom Palmer with JPMorgan. Tom, your line is open. Please go ahead.

Thomas Palmer: Good morning, and thanks for the question. Maybe I could move off the sales line a little and ask on the cost savings, the $3 billion in planned savings over the next 4 years. I think elements of the, of the savings that were laid out were maybe already in place, so although maybe not fully quantified. So could you maybe provide a little bit of detail on what pieces such as were kind of underway and maybe to an extent already embedded in your expectations versus the pieces that are new and we should kind of look to ramp over the next 4 years. Thank you.

Dana McNabb: Thanks for the question. I think as we talk about transformation, we have to start first with reminding everyone that our primary goal is to restore profitable organic sales growth. And all of our cost saving efforts are in service to that goal. When you look at the $3 billion we have approximately $2 billion of that is expected to come from HMM and that really is at a rate consistent with what we have delivered over the past few years. Is a really strong capability Our commercial teams lead. it is about understanding what the consumer values and putting back in what they do value and taking out what they do not value.

And so that is something that is been consistent over the years. The other billion is expected to come from the acceleration that we have talked about from our Global Transformation Initiative and other cost saving actions. And that is really about improving our end to end business processes, and identifying new ways of working when you think about new tools, technology, operating models to be more agile. So 1 of those areas that we talked about on the prepared remarks that we are thinking about is our supply chain transformation. I really want to emphasize that our supply chain is truly, I think, the best in food, very good at what they do.

But our supply chain was also built for a different time. A little bit lower volume. We have seen that we need faster innovation, more packaging flexibility. And so it is really about thinking, how do we reimagine the supply chain for the future so that we can get at profitable growth. And we are still really in the early phases of this design, we do not have more to share, but we will come back and share more as we get more detail.

Thomas Palmer: Thanks for that detail, Dana. I also wanted to ask on cost inflation expectations. It is a dynamic environment, obviously, on the fuel side. How did you I guess, make your assumptions here just on how the year progresses from an inflation standpoint? How you are assuming kind of fuel costs look? And then how much visibility versus given hedges and things like that versus assumptions in are embedded in that 4% to 5%? Thanks.

Kofi A. Bruce: Sure. This is Kofi. Just to give some perspective, our inflation outlook of 4 to 5% assumes about $100 a barrel on oil on the uncovered portion of the year and conversion cost based on a lagging PPI. So we are we are covered about 8 to 9 months out. So the uncovered portion of the year is relatively small. We are fairly locked in. You know, what I would say is that as we work our way through the year, we would expect that, you know, any meaningful change in oil on its own would fall within that range of our, of our guidance. Just given the amount that we have got covered through the year.

Thomas Palmer: Okay. Thank you.

Operator: Your next question comes from the line of David Palmer with Evercore ISI. David, your line is open. Please go ahead.

David Palmer: Great. Thank you. Just to follow-up on your previous comments on dollar market share trend, which you anticipate improving in fiscal 2027. Any more specifics you can offer on that? What sort of dollar category growth do you think will happen this year? And do you anticipate mills starting to grow in line with the category by the end of the fiscal year? Is that what is baked into your guidance? And I have a follow-up. So Thank you for the question.

Dana McNabb: I do not think that I will predict dollar share on all of our categories. That would probably get me into trouble. But as we said in our prepared remarks, we are assuming our categories will track roughly in line with F26. And for NAR, that is roughly flat in dollars. So we expect to deliver improved NAR retail sales performance with a combination of remarkability, We do think that we will see some modest price mix because remember, price mix was a real headwind for us this year. And that will help us from a dollar share perspective. And then again, this modest price mix is being driven entirely by mix with packaging formats, innovation, renovation.

I also think when you look at our dollar share performance for NAR, you can miss the fact that Totino's was a real problem for us this year. We just did not execute the way that we need to or at our standard. We had a price pack architecture conversion that was not great. We did not have the innovation that we needed to. And so going into fiscal 27, we have improved almost every lever of remarkability. We have a strong merchandising now, We have got this price pack architecture fixed. We have really good innovation, think Blasted Totino's Rolls, Ultimate Pizza that is doing really well.

And then in the frozen segment, we see Asian snacks and Mexican snacks growing really well. So we are launching an Old El Paso frozen snack. We have Wanchai Ferry that is coming over. And so I feel like we have diagnosed that business well. We are already seeing improvement into June. Now 4 weeks is not necessarily a trend, but we have improved our hot snacks trend by 1 point and our pizza trend by almost 5 points. And just stabilizing that business alone, we are not gonna turn it around overnight, but stabilizing that alone is gonna have a big impact on our dollar share performance.

David Palmer: Thanks for all that. And I will ask you 1 more tough 1. I just you guys are really good on consumer insights, and I was just seeing some data that showed that very low income consumers, let's call it the under $50 thousand crowd, was actually spending more on at home food. It was, you know, decent dollar growth because they are trading down from restaurants. And then the over $100 thousand which might be the upper third, they were also spending more on at home because they were trading into higher priced, often smaller brands, approaching centric, whatever the wellness news of the day.

The middle of the third is, you know, a little bit more compressed because they are making choices all over the place, restaurants and at home. I wonder how you think about your consumer. Where are the trends by income cohort today? And where do you see the improvement coming in 2027 and beyond? And thank you.

Dana McNabb: Thanks for the question. When you look at home eating consumption, we see that in the last quarter pretty stable at 86%. We did not see it move around. We did see the more the lower middle lower income households eat a little bit more at home and spend a little bit more on staples, so think cooking from home, but nothing significant. And again, I will come back to when you have brands as big as ours, you have a wide consumer base that you have to serve. You have to make sure that your everyday shelf price is right, that you have opening price points that are that are easier for lower income households to access.

That is done with packaging innovation. And then also for the larger families that you have large packs that deliver value. And so what we are being really smart about is making sure that we understand how stressed the consumer is going into this fiscal year, that we do not take that for granted, and that we make sure that we are bringing the right value. And then as you said, there is a portion of the economy in this K-shaped economy that will spend more. And so we have got to make sure that we have the benefits and the new products and the renovation that they are willing to spend against. That is functional nutrition, bold flavors.

And so we are bringing a significant amount of new product innovation Think the example of Cheerios protein that we had this year in almost every category. Our humanization trend in pet will continue and cats are on fire, cat growth is on fire, so tiki cat. And our blue teaspoons and our wilderness cat we think will continue to perform. To me it is about understanding exactly where the consumer is not underestimating how stressed they are and making sure we have the benefits in the right places to deliver for them.

David Palmer: Thank you.

Operator: Your next question comes from the line of Peter Galbo with Bank of America. Peter, your line is open. Please go ahead.

Peter Galbo: Hey, good morning, guys. Thanks for the questions. Dana, in your prepared remarks, and you talked about it a bit on the call today, you spent a lot of time on innovation and renovation, and I think we would all agree that is probably the right kind of next move to improve product quality or attributes. But, obviously, that comes at a cost. And so if we just think about, you know, the cost associated with innovation and renovation, against what you have announced, you know, probably more incremental cost savings from an HMM perspective.

Just can you help us bridge how those 2 ideas can kind of coexist within General Mills and we often think of, you know, the cost savings coming from, you know, the cost line that you are obviously boosting on product. So any kind of further clarity there would be helpful.

Dana McNabb: Okay. Well, good morning, Peter. And why do not I start with question, and then Kofi can do a follow-up. I mean, I think it comes back to what I talked about from an HMM perspective. So this is led by our commercial teams. it is really about making sure that we understand what the consumer values and is willing to pay for and what they do not value in taking that out. And we have started with the consumer, it allows you to have benefits that you launch that they are willing to pay for and you can manage margins appropriately. So for example, Cheerios Protein was a benefit consumers are willing to pay for.

And we were able to premium price that to the core and offset the cost of that innovation and renovation. And that is really our focus going into the fiscal year is what are consumers willing to pay for. We are gonna see a little bit of price mix appreciation and majority of that will be from mix. And then of course as we always do with the teams will focus on what are things they do not value and take it out accordingly in order to make sure that we can reinvest that back into the things they do value.

So that is our approach. it is been consistent over a number of years, and it will not change going into next fiscal year.

Kofi A. Bruce: And I would just add from a sort of annual financial modeling perspective, we would expect every year to see some significant portion of reinvestment back in the product. Either through renovation, new product innovation with costs, and to the extent that those costs come in, we are relying by and large, heavily on In fact, the genesis of our HMM discipline was all about being able to reinvest back in the business both in product as well as marketing messaging and other ideas to drive growth.

So fundamentally, you know, the step up that we are seeing last fiscal year 26, this fiscal year that we are expecting in fiscal 27, all contained within our sort of normal gearing of HMM and we can comfortably cover it even with a little bit of the step up in the inflation pressure.

Peter Galbo: Great. Thanks for that, Kofi. And maybe if I could just follow-up there and to Tom's question around inflation. Your numbers for this year the 4% to 5% kind of matching the inflation number. I guess, on a like for like basis in 2027, if we are kind of ignoring the 50 third week, are you thinking about just gross margins as being relatively flat for the year I know you have given kind of the sales and operating profit ranges for the year, but if we are just trying to bridge kind of from gross down to operating, is that the right way we should think about it?

Kofi A. Bruce: Well, I would expect a modestly less pressure on gross margin than operating margin. But I think given the shape of the P and L, there would be some modest pressure on gross margin.

Peter Galbo: Okay, thanks very much, guys.

Operator: Your next question comes from the line of Matthew Smith with Stifel. Matthew, your line is open. Please go ahead.

Matthew Smith: Hi. Thank you. Kofi, as a follow-up question on the cost outlook. When we think about the 4% to 5% net inflation, can you clarify if that includes any tariff refunds and your expectation for timing around that?

Kofi A. Bruce: Sure, Matthew. It does include expectations for tariff refunds. I think as a reminder, our biggest tariff exposures on steel and aluminum, so those tariffs are still in place and not subject to refunds. We are and have been realizing some modest amount of tariff refunds that have frankly been somewhat immaterial. So I would not expect a material contribution that we would be talking about on a go forward basis for fiscal 27.

Matthew Smith: Thank you. And as a follow-up, going back to the discussion around the expectations for organic sales, How do you think about the gating factors for getting back to positive growth for the year at the high end of your range? Is that dependent more on your initiatives around innovation and renovation and driving favorable mix, or would you kind of weight that more heavily towards the overall category performance as we move through the year. Thank you.

Kofi A. Bruce: Would say the former more than the latter. Our expectation would be that if we are, you know, if we are in the more upper end more favorable end of our range that we would see, you know, better price mix accretion and less volume pressure from the places where we are we are expecting that appreciation. So all things equal, we view that as largely within our control and somewhat independent of category development.

Matthew Smith: Appreciate it. I will pass it on. Thank you.

Operator: Your next question comes from the line of Christopher Carey with Wells Fargo Securities. Christopher, your line is open. Please go ahead.

Christopher Carey: Thank you so much. The context around the improvement in market share, realizing you certainly do not want to be overly specific which makes complete sense. I wonder if you could just contextualize the relative importance of improving share trends in Totino's and improving wilderness dog feeding. Called out in the prepared remarks that these businesses were pretty material impacts on pound volume declines. And so when you think about the outlook in these 2 businesses, specifically relative to the rest of your portfolio, Again, just a bit of context on how important share gains are here and some more detail on expectations.

Jeffrey L. Harmening: Leah. I would just say, you know, Look. I appreciate that. and this is, I think, the third question we have on market share. But I think the you know, as I think about it, you know, it is it is an and. We need to improve the things that have not been working as well. I think, Dana was pretty clear on that in Totino's and Wilderness. Totino's was a bigger challenge by the way than Wilderness just due to the absolute size of the business. And so getting that, you know, more stable will be helpful. it is a it is a matter of doing those things.

But then, you know, even more importantly, I think, is doubling down on the things that are working. And, you know, Dana talked about Tiki Cat and Cat Food, which is working. Or, you know, Love Made Fresh, which is up 80% in the last quarter from where it was before continuing to improve that. Or Cheerios protein, which I think is now a $100 million business for us and doubling down on that and Cheerios granola and kind of getting that back to growth. And so for me, our ability to get back to growth and improve share is kind of an and.

It is it is improving the things that we needed to improve, like Totino's and Wilderness and doubling down on the things that are working. I would also say, you know, our international business, which is returned to growth and specifically the Haagen Dazs business, which has done well there. And so that is how that is how we think about it. it is really it is really doubling down on both sides of the equation. And I think we can do both, and we certainly have the plans to do both. And it is now up for us to execute.

And I think importantly, we stated this before, but we are not anticipating an improved consumer environment or improved category environment. We are going to our own success this year and we are confident that we can do that.

Christopher Carey: Okay. Thanks. The follow-up is just around pet Consumption trends have been okay, certainly better than reported results in certain quarters. So the inventory volatility has been a-- kind of-- it happens here and there. Right, intermittently. I realize some of that has to do with channel and specific retailers. Is there some visibility in the smoothing out of this inventory volatility? I know that it is remain a dynamic in fiscal Q1, and I think the guidance implies that it is going to get better.

I would just ask in the context of you know, the business has actually been improving, better in the consumption data than what we have seen if we kind of smooth out recent quarter averages. And I just wonder if there is some visibility in a narrowing of this inventory gap over time and maybe a bit more context on why it is why it is lasted as long as it has. Thank you.

Dana McNabb: Yeah. Thanks for the question. And we are pleased with our performance. We finished the year with retail sales up 1%, growing share on our life protection formula, on our cat businesses, obviously, we have seen a significant improvement in Love Made Fresh. So as it comes to our retail sales versus our inventory or sell in, As we have dug deeper, as you mentioned, we have seen a consistent headwind from customer mix. With our fastest growing customers, think e comm and mass carrying significantly less inventory than our traditional customers. So this was really the key component of the 2 point gap between our organic sales and our retail sales in Q4.

For the full year, our channel sales, as I said, were up 1%. But organic sales lagged about 4 points. So we think it is prudent as we go into next year to assume a low single digit headwind from the retail inventory in FY 2027 with customer mix being the key contributing factor.

Christopher Carey: Okay. Thank you.

Operator: Your next question comes from the line of Robert Dickerson with BTIG. Robert, your line is open. Please go ahead.

Analyst: Great. Thanks so much. Maybe I can just try to, like, recap and summarize a little bit on the organic sales outlook for the year. Just kinda given all the comments already stated. Right? So, if, as you said, you know, focus on dollar share, price mix must be more of a contributor. Flat category assumption rather than Q1, I guess, is a little bit below algo for the year. And then the guide is still actually down year over year.

So when we wrap all that up, and then we frankly, combine it, just the dynamic of you know, trying to figure out what is working and what consumers want and shifting the mix some and maybe going a little bit more premium. Is it fair to, 1, I guess, to frankly assume, obviously, volumes will still be down for the year, and I do not hear kind of commentary around, like, you know, maybe you are turning positive in the back half. And maybe that is just a function of, like, this is the year where you say we are kinda just shifting that mix to get to a point such that we can actually grow the volumes later.

But in some of our core brands, there might still be a little bit more, you know, volume contraction necessary to find that base And then when we get into 2028, you know, yes, the hope here along with the cost savings is for the volume to come back. I do not know if all that makes sense. there is a lot in there. But thank you so much.

Jeffrey L. Harmening: Yeah. there is there is there is a lot in there. You summarize, you know, you summarize a lot of what we are doing, so I appreciate that. You know, I just I would I would kinda back it up to the first principle, which is, you know, our job is to improve our organic sales trajectory. And to do that, profitably. that is really the job. that is what we are looking to do. And all the things you just mentioned are in service to that as well as the transfer transformation that we also discussed. And so for us, we made improvements in household penetration and our base business this year.

And so the next step in that evolution is really to improve the trajectory of our organic sales. And then do it profitably. And that is what we are looking to do this year against the backdrop of a consumer environment, which we still think will be stressed this year. So think it is really important to reiterate, which I think I have done, but to reiterate that you know, we are not expecting that environment to improve. And so that is that is the main objective, and we feel confident that we can hit that objective. And to the extent that leads to even better things in 2028, we will leave that for another day.

But our job to do this year is to improve upon what we had last year, and we feel like we have the plans in place to do that, both on the sales line as well as the transformation. well as the transformation. Okay. Okay. Fair enough. And then maybe just a very easy question: You clearly have made a fair amount of portfolio adjustments over the past call it, 3-5 years. Heard a lot of commentary about you know, excess cash would go to deleverage. You know, kinda just where you sit now. Know, would you say, like, we feel great about the portfolio. Do not foresee anything.

Almost kind of in the in the near term, or are you still looking at certain parts of the portfolio strategically? Thanks. No. that is fair. that is a very fair question, and I am glad I am glad you asked. You know, as we first of all, we are we are very proud of our portfolio shaping over the last number of years and we think we have been effective at it. We know we have been disciplined at So whether that is additions like Blue Buffalo or Tiki or whether that is divestitures like yogurt or what we have announced with Brazil or our Haagen Dazs shops.

We have been very disciplined on both sides of the acquisitions and divestitures. And we have an always on capability when it comes to M&A. And we have not really changed how we think about M and A or in that sense, how we think about capital allocation. But what I would say is that our focus really now is squarely on organic sales growth and doing it profitably. And so to that extent, and as you look at the balance sheet and where we are, our bar for M and A is going to be very, very high. And specifically on the acquisition front.

And so while we have not changed how we think about it, the bar for portfolio shaping is high. And our number 1 priority is getting back to organic. Sales growth and doing that profitably. Alright. Super. Thanks, Jeffrey.

Operator: Alright, thank you. We have reached the end of the Q&A session. Jeff Siemon for closing remarks. Go ahead.

Jeff Siemon: Yeah, thank you, Samantha. So I appreciate everyone's good discussion this morning. Thanks for the engagement. I know we did not quite get to everyone's questions, so please do not hesitate to reach out for any follow ups. Wish everybody a great summer. Go U.S. Men's National Team today, and we will talk to you all soon. Thank you very much.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

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