General Mills, Inc. (NYSE:GIS) Q3 2023 Earnings Call Transcript

General Mills, Inc. (NYSE:GIS) Q3 2023 Earnings Call Transcript March 23, 2023

Operator: Greetings, and welcome to the General Mills Third Quarter Fiscal ’23 Earnings Q&A Webcast. During the presentation, all participants will be in a listen-only mode. Later, we will conduct a question-and-answer. As a reminder, this conference is being recorded, Thursday, March 23, 2023. It is now my pleasure to turn the conference over to Jeff Siemon. Please go ahead.

Copyright: stocking / 123RF Stock Photo

Jeff Siemon: Thank you, Tina, and good morning to everyone. Thank you for joining us today for this Q&A session on our third quarter fiscal 2023 results. I hope everyone had time to review the press release, listen to our prepared remarks and view our presentation materials, which were made available this morning on our Investor Relations website. It’s important to note that in our Q&A session, we may make forward-looking statements that are based on our current views and assumptions. Please refer to this morning’s press release for factors that could impact forward-looking statements and for reconciliations of non-GAAP information, which may be discussed on today’s call. I’m here with Jeff Harmening, our Chairman and CEO; Kofi Bruce, our CFO; and Jon Nudi, Group President of our North America Retail segment. Let’s go ahead and get to the first question. Tina, can you please get us started?

See also 15 Countries Where Bitcoin is Legal or Illegal and 15 Biggest Chinese State-Owned Companies.

Q&A Session

Operator: First question comes from David Palme of Evercore. One moment please. First question comes from Andrew Lazar of Barclays. Please go ahead.

Andrew Lazar: In Pet, you called out high single-digit takeaway through nine months. And I’m curious what you have is takeaway in fiscal 3Q specifically. And regarding 4Q, I believe you’ve previously spoken to your expectation for double-digit sales guess, given where we can see consumption trends currently, trying to get a sense of what gives you confidence in that outcome, given it more inventory rebuild to go or a step-up in consumption along with better service or more of a benefit from pricing or some combination of these?

Jeff Harmening: Andrew, this is Jeff, and thanks for the question about Pet. I would say, first, I would say our third quarter sales, was roughly in line with what we thought it would be at 15%. And it is true that we rebuilt some retail inventory. I think importantly, when you look at it, we built about as much inventory back in the third quarter as we lost in the second quarter. And for the year, our inventory and our — I mean, our sales out and our reported net sales are about the same. So just you know, as we end the third quarter, we don’t have a big retail inventory build they really are about the same. I would also say, and this may sound like a little bit of a spin, but I’m actually glad that we could rebuild some inventory in the third quarter.

We didn’t think we’re going to be able to. But because our supply chain got better pretty quickly in the third quarter, our service levels got to 90% or so. Especially in dry dog food as well into the 90s. Because that happened, we were able to rebuild our inventory. Our customers are glad. Our retail customers are glad we’re back in business. And so we shipped some inventory from promotions and so forth. So we’re pretty pleased with the pet business, and there’s more work to do. For sure, there’s more work to do, but it was a good quarter in terms of the ability to rebuild some inventory. The other thing I would say, a couple of more points. I think when you look deeper into our third quarter and retail movement, what you’ll see is that our dry dog food business really performed quite well and Life Protection Formula continued to accelerate and was up 23% in dollar terms, but also 9% in pounds.

And so we’re feeling really good about our dry dog food business, which is good because that’s one we thought we’d recover the fastest followed by treats and then wet. And that seems to be the case. The other thing I’d point out about retail movement is that our third quarter last year in Pet was very, very strong. And so, as you look at the comparisons, we actually sold more dog food and pet food in Q3 than we did in Q2, both in terms of pounds and RNS. So, it sequentially got better even if the comparisons don’t look that great to Q3 in retail movement. And so as we said before, we’ll grow double digits in the back half of the year, and we certainly did that in the third quarter, and we’ll see what the fourth quarter brings.

Andrew Lazar: Okay. And then just a quick follow-up. You mentioned mid-single-digit inflation expected for fiscal ’24. I’m curious if you think the carryover benefit from pricing already implemented and in place would be enough along with productivity to handle this? Or perhaps would other actions maybe be necessary, at least based on what we can see today. Admittedly, it’s dynamic.