General Mills (NYSE:GIS) executives highlighted progress on the company’s “remarkability” agenda while reporting lower earnings in fiscal 2026’s second quarter, citing brand investment, portfolio changes, and trade timing impacts. The company reaffirmed its full-year outlook, saying improved volume and sales trends from the first quarter to the second quarter support expectations for further improvement in the back half of the year.
Second-quarter results: improved trends, but profit down
For the fiscal 2026 second quarter, General Mills reported net sales of $4.9 billion, down 7% year over year. CFO Kofi Bruce said results included “significant sales and profit headwinds” from remarkability investments, the impact of North American yogurt divestitures, and unfavorable trade expense timing. The company said divestitures and acquisitions were a 6-point headwind to net sales in the quarter, while foreign exchange was “immaterial.”
Profitability declined. Adjusted operating profit was $848 million, down 20% in constant currency, and adjusted diluted EPS was $1.10, down 21% in constant currency. Bruce attributed the EPS decline primarily to lower adjusted operating profit and a higher adjusted effective tax rate, partially offset by fewer shares outstanding.
Management said Q2 profit finished ahead of internal expectations due to timing benefits in the supply chain, stronger-than-expected international sales growth, and a modest shipment timing benefit in North America Retail. Bruce said these items are expected to unwind in the third quarter.
Remarkability strategy and consumer behavior
Harmening said the company’s “primary focus this year” is investing to strengthen brand “remarkability,” arguing that improving product, packaging, brand communications, omnichannel execution, and value is central to restoring organic sales growth. He pointed to base price adjustments across roughly two-thirds of the North America Retail portfolio during the quarter as part of an effort to improve consumer value and support brand investment.
Harmening also said the company is seeing a consumer shift that is increasing the “cost of volume” across categories. According to Harmening, lower- and middle-income consumers are making a greater proportion of purchases on promotion rather than at everyday prices, without an increase in promotion frequency or depth from General Mills or competitors compared with a year ago. He said the company will monitor the trend and believes its focus on value is appropriate in the current environment.
Segment performance: Retail pressured, Pet stabilizes, International strong
North America Retail organic net sales fell 3% in Q2, driven by unfavorable price mix and partially offset by growth in organic volume. Bruce said organic volume growth “modestly outpaced” Nielsen-measured retail volume growth, largely due to shipment timing differences. Segment operating profit declined 21% in constant currency, driven primarily by lower volume including the impact of the yogurt divestitures.
Harmening said General Mills held or grew pound share in eight of its top 10 U.S. categories. Within those top 10 categories, he said Nielsen-measured pounds were up 1% during the quarter, and household penetration increased for the second consecutive quarter.
North America Pet net sales rose 11%, including the impact of the Whitebridge acquisition. Organic net sales increased 1%, driven by favorable price mix and partially offset by lower volume. Bruce said all-channel retail sales were up 1%, translating into the segment holding dollar share. Segment operating profit fell 12% in constant currency, with Bruce citing higher input costs and higher SG&A expenses, including investments supporting the Love Made Fresh launch.
Harmening said performance was led by mid-single-digit growth in cat feeding, with Tastefuls and Tiki Cat contributing, while dog feeding results were mixed—Life Protection Formula improved, but Wilderness remained challenged. He said the company is working on the product offering for Wilderness under its remarkability framework.
North America Foodservice organic net sales were flat, with growth in frozen baked goods, cereal, and frozen meals offset by a decline in bakery flour, including a 3-point headwind from index pricing. Foodservice operating profit declined 12%, reflecting the yogurt divestiture headwind, partially offset by growth in the remaining business. Harmening said the company held core share and nearly 90% of priority businesses, and he highlighted share gains in K-12 cereal and biscuits.
International organic net sales increased 4%, driven by growth in Brazil, China, India, and North Asia. International segment operating profit increased 30% in constant currency, driven by favorable price mix and higher volume, partially offset by higher SG&A expenses. Harmening cited Häagen-Dazs and Nature Valley performance, and said the company plans a new Häagen-Dazs brand campaign in Q3.
Margins, joint ventures, cash flow, and shareholder returns
General Mills reported an adjusted gross margin of 34.8%, down 150 basis points year over year, primarily due to higher input costs, partially offset by favorable mix from the yogurt divestitures. Adjusted operating margin fell 290 basis points to 17.4%, driven by lower gross margin and higher SG&A as a percentage of sales. Bruce said SG&A ran higher in part because of a double-digit increase in media investment during the quarter.
Joint venture results swung to a combined after-tax loss of $60 million, versus after-tax earnings of $30 million a year ago. Bruce said the change was driven by General Mills’ $85 million pre-tax share of a non-cash goodwill impairment charge at Cereal Partners Worldwide.
For the first half of fiscal 2026, operating cash flow was $1.2 billion, which Bruce said was down year over year primarily due to lower net earnings excluding the pre-tax gain on divestitures. The company reported capital investments of $253 million in the first half, paid $659 million in dividends, and returned $500 million through net share repurchases.
Guidance reaffirmed; Q3 expected to be weaker
Management reaffirmed its fiscal 2026 outlook. General Mills continues to expect organic net sales in a range of down 1% to up 1%. Adjusted operating profit and adjusted diluted EPS are expected to be down 10% to 15% on a constant currency basis, with free cash flow conversion of at least 95% of adjusted after-tax earnings.
Bruce said the company expects improved organic net sales in the second half, supported by the expanded impact of remarkability investments and trade timing benefits in the fourth quarter. However, he said third-quarter operating profit is expected to be down more than previously anticipated due to the unwind of Q2 timing benefits and the higher cost of volume cited by Harmening. The company expects stronger profit growth in Q4 due to favorable trade timing comparisons, the benefits of a 53rd week, and continued improvement in organic sales trends.
In closing remarks, Harmening said he was encouraged by improved top-line performance in Q2 and expressed confidence in plans to build momentum through the second half, while noting the company is operating in a volatile external environment.
About General Mills (NYSE:GIS)
General Mills, Inc (NYSE: GIS) is a multinational consumer foods company that develops, manufactures and markets a broad portfolio of branded food products. Its product categories include ready-to-eat and hot cereals, baking mixes and ingredients, snacks and bars, refrigerated and frozen doughs, yogurt and other dairy products, and a variety of shelf-stable meals and meal components. The company’s portfolio features widely recognized consumer brands across grocery store, mass channel and foodservice outlets.
Founded in the early 20th century and incorporated under its current name in 1928, General Mills has grown through both internal brand development and strategic expansion to become a global food company.
