General Mills (NYSE: GIS) reported Q1 EPS of $1.00, $0.13 better than the analyst estimate of $0.87. Revenue for the quarter came in at $4.4 billion versus the consensus estimate of $4.2 billion.

• Net sales increased 9 percent to $4.4 billion; organic net sales1 were up 10 percent
• Operating profit increased 29 percent to $854 million; constant-currency adjusted operating profit was up 22 percent
• Diluted earnings per share (EPS) totaled $1.03, up 21 percent from the prior year; adjusted diluted EPS of $1.00 increased 27 percent in constant currency
• Company announces 4 percent quarterly dividend increase to $0.51 per share

“We continued to drive exceptional results this quarter, highlighted by broad-based market share gains amid elevated at-home food demand due to the COVID-19 pandemic,” said General Mills Chairman and Chief Executive Officer Jeff Harmening. “The fundamentals of our business are strong. We’re investing in our brands, executing with speed and agility, and maintaining our focus on the health and safety of our employees and our consumers. And, importantly, we’re resuming dividend growth sooner than initially planned. I’m more confident than ever that General Mills is poised to emerge from the pandemic a stronger company and in a position to generate consistent, profitable growth and top-tier returns for our shareholders.”

Fiscal 2021 Outlook and Priorities

General Mills continues to expect the largest factor impacting its fiscal 2021 performance will be the relative balance of at-home versus away-from-home consumer food demand, driven by the COVID-19 pandemic and resulting global macroeconomic headwinds. Through the first quarter of fiscal 2021, at-home food demand remained elevated relative to pre-pandemic levels, though it moderated from the fourth quarter of fiscal 2020, as expected, driven by the easing of pandemic-related restrictions and increased restaurant re-openings. The company expects second-quarter at-home food demand to remain elevated compared to pre-pandemic levels, including high single-digit aggregate retail sales growth in General Mills’ North America Retail categories. The magnitude and duration of elevated at-home food demand remains highly uncertain, and as a result, the company is not currently providing a full-year outlook for fiscal 2021 growth in organic net sales, adjusted operating profit, and adjusted diluted EPS.

“In an uncertain environment, our job is to stay focused on what we can control,” Harmening said. “We are positioned to compete and win in our categories this year, regardless of the level of demand. And we’ll do that while driving efficiency, reducing our debt leverage, and investing for long-term success.”

General Mills outlined three priorities for fiscal 2021 that will allow it to deliver competitive performance in the short term while continuing to advance its long-term goals:

1. Compete effectively, everywhere we play, leading to market share gains, increased brand penetration, competitive service levels, and strengthened customer partnerships. General Mills continues to expect net sales growth in fiscal 2021 will be positively impacted by its superior execution as well as elevated at-home food demand, relative to the pre-pandemic period. The company anticipates headwinds to fiscal 2021 net sales growth from comparisons against the 53rd week, the extra month of Pet results, and the pandemic-related increase in demand in the fourth quarter of fiscal 2020.
2. Drive efficiency to fuel investment. The company’s objective is to deliver a full-year fiscal 2021 adjusted operating profit margin approximately in line with fiscal 2020 levels. After posting an increase in adjusted operating profit margin in the first quarter, the company expects second-quarter adjusted operating profit margin to decline, driven by higher costs to service demand, including increased utilization of external manufacturing capacity that will most heavily impact the second quarter, as well as the comparison to the prior-year period that included a timing-related manufacturing leverage benefit. The company expects full-year margin tailwinds from HMM savings and volume leverage to be offset by headwinds from input cost inflation, higher costs to service elevated demand, increased investment in brands and capabilities, and higher ongoing health and safety-related expenses.
3. Reduce leverage to increase financial flexibility. The company expects to close fiscal 2021 with a net debt-to-trailing 12-month adjusted EBITDA ratio below 3.2x.

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