GIS Q4 Deep Dive: Volumes Remain Under Pressure Despite Pricing Actions and New Launches

Packaged foods company General Mills (NYSE:GIS) beat Wall Street’s revenue expectations in Q4 CY2025, but sales fell by 7.2% year on year to $4.86 billion. Its non-GAAP profit of $1.10 per share was 7.1% above analysts’ consensus estimates.

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StockStory’s Take

General Mills’ fourth quarter results were met positively by the market, as revenue and non-GAAP profit per share both exceeded Wall Street expectations. Management attributed the performance to ongoing pricing strategies and new product innovation in North America Retail, alongside early momentum within the Pet segment. CEO Jeffrey Harmening emphasized that strategic price adjustments and a strengthened product pipeline helped the company gain pound share in eight of its top ten categories, while the launch of Love Made Fresh in Pet contributed to incremental share gains. However, management acknowledged persistent volume declines and a promotional environment shaped by cautious consumer spending, particularly among middle and lower-income households.

Looking ahead, management’s guidance is centered on sustaining top-line momentum in the second half, with a focus on turning the corner on profitability in the fourth quarter. The company is relying on continued improvement from price investments, a robust pipeline of new products, and enhanced marketing efficiency. CFO Kofi Bruce cautioned that factors such as higher costs to drive volume and ongoing tariff headwinds could pressure margins, but expects favorable trade timing and a 53rd week to support profit growth. Management remains attentive to the balance between recovering volumes and protecting profitability, stating that "the cost of volume and the pace of volume recovery are probably the two biggest determinants of where we land within that range."

Key Insights from Management’s Remarks

Management pointed to pricing actions, product innovation, and targeted marketing as key drivers of the quarter, while recognizing the impact of ongoing consumer caution and shifting buying patterns.

• Strategic pricing adjustments: General Mills implemented base price changes across two-thirds of its North America Retail portfolio, aiming to narrow price gaps and boost competitiveness. Management reported these adjustments performed at or above expectations in nearly 90% of instances, helping offset past inflation and support category share gains.
• Product innovation pipeline: The company increased its focus on new product launches, anticipating a 25% rise in innovation for the year. Strong early performance was noted for new Cheerios Protein and granola SKUs, both designed to address shifting consumer preferences toward higher-protein and healthier options.
• Pet segment improvement: The North America Pet business showed improvement, driven by gains in the Life Protection Formula and Treats categories. The Love Made Fresh launch achieved distribution in nearly 5,000 coolers and approximately 5% market share among initial customers, though management noted it is early to assess the broader impact on the core business.
• Consumer behavior shifts: Management highlighted ongoing pressure on lower- and middle-income consumers, leading to increased purchases on promotion and a channel shift toward e-commerce in the Pet segment. While the overall promotional environment remained rational, these trends influenced volume and product mix.
• Margin and cost headwinds: Operating margins declined year-on-year, with management citing higher costs associated with driving volume and ongoing tariff and input cost pressures. While cost savings from holistic margin management are expected to partially offset these headwinds, management acknowledged that “the pace of volume recovery and the cost of volume are the two biggest determinants” for margin performance.

Drivers of Future Performance

General Mills’ outlook is shaped by efforts to maintain volume recovery, execute on cost savings, and manage inflationary and tariff pressures.

• Volume and price mix recovery: Management expects further improvement in organic sales, underpinned by sustained momentum from strategic price adjustments and new product launches. However, the timing of shipment and trade expense phasing will create uneven quarterly comparisons, and sustained volume growth may take additional time to materialize across key categories.
• Margin pressures and cost control: The company anticipates continued margin headwinds from higher costs to drive volume and increased tariffs, particularly in the second half. Holistic margin management and transformation initiatives are expected to deliver over 5% in cost savings this year, but management remains cautious about the pace of margin recovery.
• Category and channel dynamics: Shifting consumer preferences, such as the move toward high-protein alternatives in cereal and increased e-commerce penetration in Pet, are central to the company’s growth strategies. Management believes capturing these trends will be critical to sustaining share gains and offsetting areas of lingering weakness.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be closely watching (1) whether General Mills can sustain improved volume and share trends in North America Retail, (2) the effectiveness of new product launches—especially in high-protein cereals and the Love Made Fresh Pet line, and (3) the company’s ability to offset ongoing margin pressures from tariffs and higher costs through its holistic margin management program. Progress in capturing e-commerce growth within Pet and execution on category leadership initiatives will also be important milestones for tracking operational momentum.

General Mills currently trades at $48.65, up from $47.02 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

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