General Mills Lowers Fiscal 2025 Sales Forecast by 1.5% to 2% Amid U.S. Spending Slowdown

General Mills Inc., the producer of Cheerios, has lowered its fiscal 2025 sales forecast, indicating a slowdown in consumer spending across the United States. The company now projects that organic net sales will decrease by 1.5% to 2%, a notable change from its previous estimate of flat to 1% growth. This adjustment follows mixed third-quarter results, where adjusted earnings per share (EPS) surpassed expectations but revenue fell short of estimates.

The company reported adjusted EPS of $1.00, which, while exceeding consensus estimates of $0.97, represented a 15% decline in constant currency. Revenue for the quarter was $4.84 billion, down 5% year-over-year and below the expected $4.97 billion. Organic net sales declined by 5%, missing the consensus forecast of a 2.67% decline. This performance was driven by lower pound volume, retailer inventory reductions, and slowing demand in snacking categories.

Breaking down the segment performance, North America Retail revenue declined by 7.2% to $3.01 billion, missing the estimate of $3.08 billion. Organic net sales for this segment fell by 6%. North America Foodservice revenue rose by 0.7% to $555.3 million but missed expectations of $573.1 million. Pet segment revenue was nearly flat at $623.7 million but below estimates of $638.6 million. International sales declined by 4.2% to $651.3 million, missing the forecast of $680.4 million.

General Mills attributed the sales shortfall to multiple factors, including a sharper-than-expected reduction in retailer inventories, which created a four-percentage-point gap between retail sales and organic sales growth. Additionally, snacking categories showed signs of weakness, with U.S. morning foods and snacks experiencing pressure. However, the company highlighted areas of strength, including improving trends in Pillsbury refrigerated dough and Totino’s hot snacks, where increased investment has started to pay off.

Despite the topline weakness, the company managed to expand gross margin by 40 basis points to 33.9%, supported by cost savings from its Holistic Margin Management (HMM) initiatives. However, adjusted gross margin declined by 60 basis points to 33.4%, weighed down by higher input costs and unfavorable price realization.

General Mills' results provide a snapshot of evolving consumer trends in the packaged food industry. The company noted that U.S. consumers remain highly price-sensitive, with demand softening in non-essential food categories like snacks. This aligns with broader retail trends, where shoppers continue to prioritize value amid persistent inflationary pressures. Away-from-home food demand, including sales to restaurants and institutions, showed some resilience, with the foodservice segment posting modest gains. However, international markets were mixed, with weakness in certain regions partially offset by growth in others.

Pet food, another key business for General Mills, showed signs of stagnation. While wet pet food and treats saw mid-single-digit growth, dry pet food demand lagged, likely reflecting shifts in consumer spending habits.

Management lowered its fiscal 2025 outlook, now expecting organic net sales to decline between 1.5% and 2%, compared to its prior forecast of flat to up 1%. Adjusted EPS is expected to decline between 7% and 8% in constant currency, down from previous guidance of a 1% to 3% decline. This revision underscores ongoing headwinds in the packaged food sector. The company said it plans to accelerate investments in brand communication, innovation, and consumer value in fiscal 2026, funded by cost savings initiatives. General Mills expects its HMM productivity program to generate at least $600 million in gross cost savings next year, alongside additional efficiency measures targeting at least $100 million in incremental savings.

General Mills did not incorporate any potential impact from U.S. import tariffs in its guidance, citing uncertainty around their timing and scope. Given the company’s reliance on imported ingredients and global supply chains, new tariff policies could pose additional cost pressures and impact pricing strategies in future quarters. Broader macroeconomic factors, including inflation trends and consumer confidence, will also play a key role in determining the company’s near-term performance. With the Federal Reserve’s rate decisions and trade policy developments in focus, investors will be watching for signs of improving demand trends in packaged foods.