General Mills Faces Profit Headwinds and Slower Growth Amid Tariff Pressures

Related Stock: GIS

Publication Date: June 25, 2025

General Mills (NYSE:GIS) has issued a cautious financial outlook for its upcoming fiscal year, signaling potential challenges ahead. The packaged food giant anticipates flat-to-negative organic sales growth and a significant decline in adjusted operating profit, primarily due to weakening consumer demand and escalating input costs exacerbated by U.S. tariffs. Following this announcement, the company's shares experienced an intra-day decline of over 3%.

Fiscal Year 2026 Outlook

For fiscal year 2026, General Mills projects organic net sales to range from a 1% decrease to a 1% increase. More notably, adjusted operating profit is forecast to fall by 10% to 15% in constant currency, compared to last year's base of $3.4 billion. The company attributes this expected earnings pressure to several factors:

• Tariff-driven cost inflation: Increased expenses stemming from U.S. tariffs.
• Elevated strategic spending: Higher investments in key initiatives.
• Corporate incentive reset: Changes in employee incentive structures.

These headwinds are expected to outweigh the benefits derived from ongoing cost-saving initiatives and an additional fiscal week in the upcoming year.

Challenging Consumer Environment

General Mills also acknowledged that category growth in fiscal 2026 is likely to underperform its long-term expectations. This subdued outlook is largely attributed to a tough consumer environment, where budget-conscious shoppers are exhibiting reduced spending amidst economic uncertainty and growing price fatigue. This trend highlights a broader challenge for consumer staples companies navigating evolving purchasing behaviors.

Strategic Investments Despite Headwinds

Despite the near-term financial pressures, General Mills plans to continue making substantial investments in strategic growth areas. Key focus areas include:

• Its U.S. fresh pet food business.
• Value-focused innovation.
• Brand support and marketing efforts.

These investments underscore the company's long-term strategy to adapt to market shifts and capture new growth opportunities.

Fourth Quarter Performance

In its fiscal fourth quarter, General Mills reported a 3.3% year-over-year decline in net sales, reaching $4.56 billion, which was slightly below consensus estimates. However, adjusted earnings per share (EPS) came in at $0.74, marginally exceeding the expected $0.71. Despite the slight EPS beat, the cautious guidance and anticipated margin pressures weighed heavily on investor sentiment, emphasizing the difficult path ahead for consumer staples firms grappling with persistent inflation and changing consumer preferences.