General Mills’ volume-first pivot hits resistance: Retail slumps while Pet and International do the lifting

General Mills opened fiscal 2026 with a results mix that underscores the company’s strategic tension: how far to push price and promotion to revive volumes without crimping profits. For the quarter ended August 24, 2025, net sales fell 6.8% to $4.52 billion, while adjusted EPS landed at $0.86—above consensus but below last year’s base. Management kept its full‑year outlook unchanged. The headline tells a story of a portfolio in transition: North America Retail remained soft, Pet and International grew, and the yogurt exit continues to reshape the top line. (reuters.com)

The surprise was not in the numbers themselves—Wall Street expected a revenue step‑down—but in where the pressure surfaced. North America Retail sales dropped double digits, even as the company’s renewed push on value (price points, pack sizes, and sharper promotions) is meant to bend volumes back to growth. Reuters flagged a steep volume decline in North America this quarter, evidence that the volume recovery will be a grind, not a snap-back, despite selective price cuts. Management’s decision to reaffirm guidance signals confidence in that playbook, but also a recognition that category growth is slower than the old normal. (reuters.com)

General Mills is trying to re‑ignite volume in U.S. center‑store staples by leaning harder into price points and pack architecture—what it calls “remarkable value.” The quarter suggests that strategy is working only selectively. North America Retail was the clear weak link, with Reuters noting a sharp volume drop despite targeted price reductions; Barron’s tallied a 13% sales decline in retail and a 4% drop in foodservice. The company says categories are rational and that investments are tracking to plan, but the consumer is still stretching dollars—and trading down when presented the option. (reuters.com)

Management didn’t blink on guidance. That’s important. In early September, General Mills reiterated full‑year targets: organic sales between down 1% and up 1%, and adjusted EPS down 10% to 15% in constant currency—an outlook that already bakes in heavier brand support, a reset of corporate incentives, and portfolio mix headwinds. In other words: the margin give‑back is by design this year. The calculus is that share stabilization today sets a stronger base for FY27 earnings power, aided by efficiency work. (investors.generalmills.com)

The yogurt exit is doing exactly what management said it would: it trims reported sales and simplifies the mix. The U.S. yogurt sale to Lactalis closed on June 30, which means this quarter is the first clean read without that contribution. General Mills has guided to roughly a four‑point drag on reported net sales growth this year from the combination of divestitures, acquisitions, FX, and a 53rd week—noise that investors should strip out when gauging underlying demand. Longer term, shedding a lower‑growth business improves focus on faster‑growing platforms. (investors.generalmills.com)

Pet food remains the strategic counterweight. Segment sales rose about 6% in the quarter, aided by the Whitebridge Pet Brands North America deal (Tiki Pets and Cloud Star) and ongoing work to reignite Blue Buffalo. The company has teed up a national push into fresh pet food later in calendar 2025—a higher‑growth subcategory that could reaccelerate mix if execution is tight. That, plus international strength, is doing more of the heavy lifting while North America Retail heals. (reuters.com)

If FY26 is a reinvestment year, the cost agenda is the funding source. Management plans Holistic Margin Management savings equal to roughly 5% of cost of goods sold and an additional $100 million of transformation savings—dollars earmarked for price value, product news, and brand building. That’s why guidance tolerates a double‑digit EPS decline now: the company is consciously routing productivity to the shelf and the ad budget to rebuild demand. Free cash flow conversion, meanwhile, is still targeted at 95%+, preserving the capacity to keep buying back stock and funding selective M&A. (investors.generalmills.com)

Two external realities framed these results. First, consumers remain cautious; trade‑down and private‑label competition are still biting, and management itself expects category growth below long‑term norms this year. Second, the GLP‑1 narrative hasn’t gone away; while its precise impact is debated, investors continue to discount staples with snacking exposure. Neither factor is new—but the latest quarter confirms they haven’t faded. (reuters.com)

From here, three proof points matter: (1) Volume inflection in U.S. Retail by the holiday set—if the value and pack‑size strategy works, it should begin to show up in pound share; (2) Pet acceleration as the Whitebridge brands integrate and Blue Buffalo’s innovation cadence ramps ahead of the fresh launch; and (3) International consistency to keep cushioning the portfolio while U.S. categories normalize. Management says it is holding or growing pound share in eight of its top ten U.S. categories—an encouraging early read, but investors will want to see that translate into aggregate retail growth. (investors.generalmills.com)

Bottom line: Q1 shows a company keeping its nerve on a volume‑first pivot in a tougher consumer backdrop. The Pet and International engines are doing their part; the question is how quickly the U.S. pantry recovers. With guidance intact and cost levers primed, the setup into the back half hinges on whether “remarkable value” can bend the U.S. volume curve in time. (investors.generalmills.com)