MINNEAPOLIS — On Wednesday, General Mills reported results for the fourth quarter and fiscal year ended May 30. Fiscal 2021 results reflect the impact of one fewer week compared to fiscal 2020.
General Mills is executing its Accelerate strategy to drive sustainable, profitable growth and top-tier shareholder returns over the long term. The strategy focuses on four pillars to create competitive advantages and win: boldly building brands, relentlessly innovating, unleashing scale, and being a force for good. The company is prioritizing its core markets, global platforms, and local gem brands that have the best prospects for profitable growth and is committed to reshaping its portfolio with strategic acquisitions and divestitures, including the acquisition of Tyson Foods’ pet treats business and the proposed divestiture of its European Yoplait operations, to further enhance its growth profile.
General Mills expects that changes in consumer behaviors driven by the COVID-19 pandemic will result in ongoing elevated consumer demand for food at home, relative to pre-pandemic levels. These changes include more time spent working from home and increased consumer appreciation for cooking and baking. The company plans to capitalize on these opportunities, addressing evolving consumer needs through its leading brands, innovation, and advantaged capabilities to generate profitable growth.
Fourth Quarter Results Summary
- Net sales declined 10 percent to $4.5 billion, including a 5-point headwind from an extra week of results in last year’s fourth quarter and 2 points of favorable foreign currency exchange. Organic net sales were down 6 percent, driven by lower organic pound volume reflecting the comparison against the surge in at-home food demand at the outset of the pandemic in the prior year. On a 2-year compound growth basis, relative to pre-pandemic levels, fourth-quarter organic net sales were up 4 percent.
- Gross margin was down 20 basis points to 35.0 percent of net sales, driven by higher input costs, partially offset by a mark-to-market gain compared to a loss in the prior year and comparison against a product recall charge in the prior year. Adjusted gross margin decreased 160 basis points to 34.5 percent, primarily driven by unfavorable manufacturing leverage.
- Operating profit of $548 million was down 34 percent, driven by lower gross profit dollars, higher restructuring charges, and a loss on the sale of the LaticĂnios Carolina yogurt business in Brazil, partially offset by lower selling, general, and administrative (SG&A) expenses. Operating profit margin of 12.1 percent was down 440 basis points. Adjusted operating profit of $740 million was down 18 percent in constant currency, primarily driven by lower constant-currency adjusted gross profit dollars, partially offset by lower SG&A expenses. Adjusted operating profit margin was down 140 basis points to 16.3 percent.
- Net earnings attributable to General Mills were down 33 percent to $417 million and diluted EPS were down 33 percent to $0.68, primarily reflecting lower operating profit. Adjusted diluted EPS of $0.91 were down 19 percent in constant currency, primarily reflecting lower adjusted operating profit.
Full Year Results Summary
- Net sales increased 3 percent to $18.1 billion, driven by higher organic net sales and 1 point of favorable foreign currency exchange, partially offset by a 2-point headwind from an extra week of results in last year’s fourth quarter. Organic net sales increased 4 percent, reflecting strong execution and broad-based market share gains amid elevated at-home food demand resulting from the pandemic.
- Gross margin was up 80 basis points to 35.6 percent of net sales, primarily driven by favorable net price realization and mix, lower mark-to-market expenses, and lower restructuring charges in cost of sales, partially offset by higher input costs. Adjusted gross margin was down 40 basis points to 34.8 percent of net sales, primarily driven by input cost inflation, costs to secure incremental capacity, and higher logistics costs, partially offset by Holistic Margin Management (HMM) cost savings and favorable manufacturing leverage.
- Operating profit of $3.1 billion was up 6 percent, primarily driven by higher gross profit dollars and favorable net corporate investment activity, partially offset by higher restructuring charges, a loss on the sale of the LaticĂnios Carolina yogurt business in Brazil, and higher other SG&A expenses, including higher investment in media and capabilities. Operating profit margin of 17.3 percent was up 50 basis points. Adjusted operating profit of $3.2 billion increased 2 percent in constant currency, primarily driven by higher constant-currency adjusted gross profit dollars, partially offset by higher SG&A expenses, including increased investment in media and capabilities. Adjusted operating profit margin increased 10 basis points to 17.4 percent.
- Net earnings attributable to General Mills were up 7 percent to $2.3 billion and diluted EPS were up 6 percent to $3.78, primarily reflecting higher operating profit. Adjusted diluted EPS of $3.79 were up 4 percent in constant currency, primarily reflecting higher adjusted operating profit, lower net interest expense, and higher after-tax earnings from joint ventures, partially offset by a higher adjusted effective tax rate and higher average diluted shares outstanding.
North America Retail Segment
Fourth-quarter net sales for General Mills’ North America Retail segment were down 17 percent to $2.64 billion, primarily reflecting the comparison against the surge in at-home food demand at the outset of the pandemic as well as a 6-point headwind from an extra week of results in last year’s fourth quarter. Organic net sales were down 13 percent, with lower organic pound volume partially offset by favorable organic net price realization and mix. Net sales declines totaled 30 percent in U.S. Meals & Baking, 16 percent in U.S. Cereal, 6 percent in U.S. Yogurt, and 2 percent in U.S. Snacks. Constant-currency net sales were down 9 percent in Canada. On a 2-year compound growth basis, relative to pre-pandemic levels, fourth-quarter organic net sales were up 6 percent. Segment operating profit was down 30 percent to $620 million, primarily driven by lower net sales and higher input costs, including unfavorable manufacturing leverage.
For the full year, North America Retail segment net sales increased 2 percent to $11.0 billion, primarily driven by strong execution to service increased at-home food demand, partially offset by a 2-point headwind from an extra week of results a year ago. Organic net sales increased 4 percent. On a 2-year compound growth basis, annual organic net sales were up 5 percent. Segment operating profit was essentially unchanged at $2.62 billion, driven by input cost inflation, costs to secure incremental capacity, and higher media and other SG&A expenses, offset by HMM cost savings and higher volume.
