General Mills Stock Plunges: Lucky Charms Maker Slashes Guidance

General Mills, the iconic food manufacturer behind beloved brands like Lucky Charms and Cheerios, has seen its stock price take a significant hit after the company announced a cut to its financial guidance. The stock fell by 5.4% on Wednesday, marking its biggest one-day decline in two years. This article explores the reasons behind the drop and assesses the potential impact on investors.

General Mills reported net income of $558 million, or 98 cents a share, for the quarter to May 26, down from $615 million, or $1.03 a share, in the year-earlier period. Adjusted for one-time items, the company had earnings per share of $1.01, ahead of the 99-cent FactSet consensus. However, sales fell 6% to $4.714 billion, below the $4.853 billion FactSet consensus.

The company attributed the revenue miss to a combination of factors, including a challenging operating environment, currency headwinds, and difficult market conditions in key international markets like Brazil and China. In Brazil, consumers sought value and reduced inventory, while in China, a souring consumer sentiment hurt traffic for Häagen-Dazs and the company's premium dumpling business.



Despite the revenue miss, General Mills' adjusted earnings per share (EPS) remained resilient. The company's adjusted diluted EPS remained unchanged year-over-year at $1.12, with currency-neutral adjusted diluted EPS up 1%. This was achieved through cost management strategies and efficiency improvements, such as "holistic margin management" cost savings and reinvesting in growth opportunities.

Looking ahead, General Mills expects fiscal 2025 organic sales to range from flat to up 1%. The company also anticipates adjusted EPS to be down 1% to up 1% on a constant currency basis, while FactSet is expecting a 3% rise. The company plans to accelerate organic sales growth and volume growth and pursue its "holistic margin management" cost savings to allow it to reinvest in growth opportunities.

In conclusion, General Mills' stock price decline is a result of a challenging operating environment and difficult market conditions in key international markets. However, the company's cost management strategies and efficiency improvements have helped maintain earnings growth. As the company works to accelerate organic sales growth and volume growth, investors should monitor its progress and assess the potential long-term impact on the stock price.