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General Mills' (GIS) slim earnings beat, in-line revenue, and flat volume growth in Q1 (Aug) come up stale, spurring a muted response today. The consumer packaged goods giant also reiterated its FY25 (May) financial targets. However, this was not surprising given that the company reiterated its guidance earlier this month before a consumer staples conference. With shares running hot lately, appreciating by roughly +20% since bottoming out following GIS's underwhelming Q4 (May) numbers in late June, investors were simply hungry for more buoyant headline results in Q1.

• For the quarter, net sales and organic net sales edged 1% lower yr/yr to $4.85 bln. Similarly, adjusted EPS contracted by 6% -- 2% when backing out FX impacts -- to $1.07. Organic revenue and constant currency EPS growth fell short of GIS's FY25 targets of flat to up 1% and down 1% to up 1%, respectively. However, management expected this heading into Q1, as it faced challenging yr/yr comparisons.
• On a sequential basis, GIS's numbers signaled decent improvement. Net sales expanded by 3%, and EPS moved 6% higher, leading to pound volume finishing flat compared to last year, a promising jump from the 2% drop delivered in Q4. While GIS has now gone ten consecutive quarters without registering positive yr/yr volume growth, its sequential improvement does provide some encouragement that volumes may begin to tick higher during FY25.
• The demand environment remains a problem. Consumers continue exhibiting value-seeking behaviors in light of the cumulative effects of inflation. Competitors' supply chains stabilizing is adding another wrinkle, providing consumers with several private-label alternatives. Meanwhile, in China, the situation is even worse as headwinds pick up speed, translating into a significant yr/yr drop in traffic through GIS's Haagen-Dazs shops.
• On the flip side, at-home food prices have mostly stabilized, unlike away-from-home prices, which continue to rise, shifting consumer tastes toward at-home food occasions. GIS estimates this shift contributed to 1 pt of pound volume growth in its U.S. retail categories in Q1, which is ahead of its long-term expectations.
• GIS's other segments displayed a few highlights. In Pet, where GIS is amid a turnaround, the company posted improved retail sales and market share trends in Q1, supporting a 3% lift in volumes, a stark reversal from the 7% drop posted last quarter. In Foodservice, volumes decelerated from a 3% jump in Q4 to flat growth in Q1. However, management commented that it continued to capture market share in critical away-from-home channels, including K-through-12 schools, healthcare, and universities.

Silver linings were present in GIS's Q1 report. However, many of these bright spots were touched on just a few weeks earlier. For instance, GIS remarked that it was excited by the gradual volume improvement during the past three months. The company also added that it continued taking market share in several categories. As such, expectations were set higher ahead of Q1 results. Without showcasing more robust growth across the board, some of the wind was taken out of GIS's sails.