Good morning, and welcome to General Mills' Fourth Quarter Fiscal 2025 Earnings Conference Call. As a reminder, this conference call is being recorded. I would now like to turn the call over to Jeff Siemon, Vice President of Investor Relations and Corporate Finance. Please go ahead.

Thank you, Julienne, and good morning to everyone. Thanks for joining us today for our Q&A session on our fourth quarter fiscal '25 results. I hope everyone had time to review our press release, listen to our prepared remarks and view our presentation materials, which we made available this morning on our Investor Relations website. Please note that in this morning's Q&A session, we may make forward-looking statements that are based on management's 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 today with Jeff Harmening, our Chairman and CEO; Kofi Bruce, our CFO; and Dana McNabb, Group President of North America Retail and North America Pet. Before we open for questions, I'm going to hand it over to Jeff Harmening for a few opening remarks.

Yes. Thanks, Jeff. And I thought I'd start this morning, there's a lot going on up and down our P&L within our business and certainly a lot going on in the broader world. So I thought I'd just take a couple of minutes to summarize what we're trying to accomplish. The first and most important thing is really returning to volume growth, specifically in NAR, and we're really encouraged by what we've seen. We started to invest in value in Q3 of last year with Pillsbury and Totino's topped by really good advertising. We like the results of that so much that we decided we'd expand the value investments we made in soup and cereal and fruit snacks in the fourth quarter. We saw the results there that we expected. So as we go into this year, we're just continuing the formula that we had in the fourth quarter, which is to expand some of the value investments on targeted businesses that we saw, but also, really importantly, backing that up with significant consumer news. In fact, I think our new product news and our core renovation news is the best that I have seen since I've been a CEO. We discussed a lot of these in our prepared remarks. Certainly, our launch into fresh pet food, all the protein innovation we've seen in the NAR portfolio, renovating Häagen-Dazs stick bars, and so forth gives us confidence that we can get our business back to the kind of growth we're looking for. Importantly, as we're doing all this work in NAR, we did see share growth in our international businesses this past year as well as foodservice, healthcare, and pet. So that gives us a lot of confidence. We're backing up all of these investments with record levels of holistic margin management and also productivity initiatives. We're not sitting still on that front. But we know that it's an investment year, but we're very confident that these investments will pay off given what we've seen over the last couple of quarters. So with that, let's open the floor to questions.

Great. Julienne, you can go ahead.

Our first question comes from Ken Goldman from JPMorgan.

It's certainly exciting to see Blue go national from a refrigerated standpoint. One of the things you had talked about previously in the past, to paraphrase, is you were always, I think, confident in the revenue opportunity. It was a little more on the margin and cash story that was less tested. So I'm trying to get a better sense, if possible, if something has changed or you've learned a little bit more about the margin potential there. And then as the corollary to that, just trying to get a little bit of sense for your merchandising strategy for that, just given the obviously limited shelf space for that particular category.

Yes. So let me talk a little bit about this, Jeff. Let me talk a little bit about the past. And Dana, if you have any follow-on comments to share, feel free to do so. We're very excited about this big national launch. We learned a couple of important things within our last test market. One was that the Blue Buffalo brand really resonated. The second is that we can make great products. Our repeat rates were really good. I mean, we had dogs standing in front of refrigerators because they were so excited to eat this stuff. So we know that that works. What we didn't have, since we launched regionally, was the scale to market the way we needed to generate trial. As we go into this national launch, this gives us the opportunity to launch at scale. You asked about the financials. We have learned a lot, and it's been many years since we tried that test. We've actually been studying the market ever since. One of the things we've grown quite a bit more comfortable with is that, over time, this investment will take a couple of years to generate trial. That's the most important job to do. But having done that and achieved this scale, we are confident that we can build a profitable and growing business. If we weren't, we wouldn't get involved in this endeavor. It will take a little bit of investment, but we believe that we have the right activities to do it. Dana, do you want to give any insights into that?

Yes. Well, as you said, the learning really helped us to build a stronger consumer proposition, and we really think that we have a path to an attractive financial model for a fresh business at scale. We are launching Love Made Fresh nationally. It will be in all 50 states. We have a wide variety of formats and flavors to drive appeal, and these formats have been designed for maximum flexibility. Why that's important is we know that 80% of pet parents who use fresh combine it with other food formats. So they'll top it, they'll mix it, or they'll sometimes use it on its own. Then 55% of those users prefer to use kibble and fresh from the same brand. So we're really confident that Blue Buffalo has the right to win here, that we've got a unique proposition. As Jeff said, we have improved our go-to-market approach, and we're committed to investing in building quality trial and awareness. We've received really strong reception from retailers, and as we come to market, we're going to be the biggest pet brand across dry, wet, treats, and fresh. We're still in the early days, but we're excited to share more about this launch as we get closer to the date.

Our next question comes from Andrew Lazar from Barclays.

Great. Jeff, I think the level of reinvestment plan for fiscal '26 is certainly deeper, right, than most than anticipated. I understand the organic top line growth priority and the investment behind fresh. My question is, how do you ensure that the margin profile that comes with this reinvestment is being done in a responsible way, rather than giving up too much margin that may be tougher to ultimately rebuild? I guess, are there certain aspects of the reinvestment that maybe you see as one-off or temporary in nature that give you confidence that you can rebuild this margin in a reasonable time frame versus being maybe at a structurally lower level going forward, if you will?

Sure. Andrew, this is Kofi, and thanks for the question. Let me share just a few thoughts. I think we see a few factors. There's certainly a lot going on underneath the hood, and we provided firm detail in the prepared remarks. Underneath the hood, there are a couple of factors that we would see as maybe more temporary in nature. First, as Jeff alluded to, the fresh investment, while a multiyear investment, we would expect that once we build scale, we'll reach a point of profitability and return on that investment. Second, as we think about the nature of tariffs, we expect to mitigate some of the effects of tariffs, but not all within the year. This will put a little bit of drag from a timing perspective, but again, it's not something that we see as structural long term. Third, just a reminder that on the divestiture of Yoplait, we expect a little bit of a stranded cost drag as we eliminate those costs this year, but we'll have a tail end in fiscal '27. These are the factors that I think are important to consider, even as you measure what is an important and significant investment behind getting growth restarted.

Our next question comes from Peter Galbo from Bank of America.

Maybe just a quick clarification and then a question. Kofi, I think on Pet specifically in Q4, you talked about the inventory build at retail that you're expecting to reverse. So is that a full reversal in Q1? I just want to understand the magnitude there. And then, Jeff, there's been a lot of lumpiness, I think, in the reported figures on Pet. So maybe you can just give us a broader sense from your prepared remarks on just the state of underlying Pet and how you're thinking about the different verticals within that, especially given some of the lumpiness that we've seen quarter-to-quarter.

Yes. Thanks for the question. You asked Kofi the first one and me the second, but I'm going to take one for the team here and answer both. Firstly, as we look at inventory levels, our inventory levels in Pet are in a good place, broadly speaking. Over all of last year, there was very little movement in retail inventory for our Pet Food business. Since we acquired the Pet Food business, it has had a lot more lumpiness, as you mentioned, primarily due to a higher proportion of e-commerce sales, which tend to be more volatile compared to sales through grocery stores and mass merchants. I would expect that the lumpiness quarter-to-quarter will continue. To the extent we will reverse in the next quarter or not, we'll see. We're transparent about last quarter, where we saw 3 points of inventory build heading into this quarter. Whether that will dissipate at the end of this quarter or not remains to be seen. One thing I have decided is to refrain from predicting what will happen with Pet inventory from quarter-to-quarter, having been fooled a couple of times. It's a fair question, but I want to emphasize our inventory is in a solid position across our Retail business, our Human Food business, and our Pet Food business. There will always be some variability as we go quarter-to-quarter.

Great. Jeff, and just anything on the underlying Pet kind of performance, how you're feeling about that?

Yes, sorry. I get so excited about that answer. I'm really encouraged that we got our Pet business back to stability. We grew it a little bit this past year, and our share held. Some of the initiatives have really worked well. The advertising on Life Protection Formula has shown positive results. Our Cat business is back to mid-single-digit growth. The cat population is growing, which is crucial. We've integrated Tiki Cat effectively, and that brand is also seeing growth. Edgard & Cooper is performing well in Europe, and we're reintroducing it to the U.S. We have many initiatives that are showing promise. I believe our marketing in the Pet Food business is strong now. There are areas we still need to improve, but I like the positive trajectory of the Pet Food business, even without the launch of Fresh Pet Food. It's important because our goal this year is to grow the core of our Blue Buffalo business and add this new fresh launch alongside. We are encouraged by what we see. There’s still more work to do, but we've moved from a declining business to one that grew slightly this past year. Now we're looking to build on that success and address the aspects that aren’t progressing as expected.

Our next question comes from Peter Grom from UBS.

I was just hoping to get an understanding of the organic revenue phasing for the year, especially in the context of the down 1% to plus 1% guidance, starting off in a down 3% range. I'm curious how you're thinking about the phasing of growth as we move through the year. Do you expect to see a return to growth at some point? Additionally, in the prepared remarks, you outlined expectations for category growth to be similar. Are you assuming that the status quo continues, or do you expect some sequential improvement, believing you'll ultimately perform similarly to what we observed in '25?

Yes. It’s important to note that as we end this year, we saw about 2 points of trade expense phasing in our organic sales number as we exited the quarter. Regarding the projections for next year, we will have trade expense phasing comps as we make our way through the first half of the year. As we’ve made investments in the second half of this year, those comps will ease. So I’d expect that to reflect in the top line progression. I think that's a critical point. Secondly, regarding categories, we're focused on what we can control, which is our competitiveness. We're not counting on a significant rebound in categories as we navigate through the year.

Our next question comes from Chris Carey from Wells Fargo.

I have a holistic question and a quantitative follow-up. Holistically, you're probably the most intentional when it comes to pricing reinvestments in the space. I have a couple of questions on that front. First, what are you seeing in terms of competitive response to some of these early actions? Second, how do you ensure that this isn't a race to the bottom with branded competitors or private label? Lastly, can you frame gross margins versus SG&A in light of your strong HMM and the incremental $100 million of savings but concurrent substantial pricing reinvestments?

Let me take the first part of that question. When it comes to margin versus SG&A, I'll let Kofi tackle that. Concerning pricing, it's a really good question, and I appreciate it. A few points to keep in mind: first, even in the fourth quarter, our price/mix was down by 3% in North America Retail and down 1% as an enterprise. Regarding pricing actions and a potential race to the bottom, that’s not our intention. The magnitude is about that much. We're investing significantly in advertising this year on new products and all the rest. It’s not solely about pricing; it's about investment to ensure we generate trial for all our marketing initiatives. Each category doesn't see us leading price reductions across the board, as we take targeted actions in specific areas. For instance, in Pet Food, we adjusted pricing on our wet pet food to align with competition while not reducing prices on Life Protection Formula, as it is in a good place. Similarly, for our Cat Food business, we're taking targeted approaches to optimize pricing. The bottom line is we aim to return our brands, which are generally premium, to their rightful position, ensuring that our marketing complements these price adjustments. Having seen successes with Pillsbury and Totino's, we're confident that our investments will drive positive outcomes.

Regarding your SG&A question, we would expect SG&A to grow a little faster than our top line. This is due to some reinvestments, including increased media behind our fresh pet launch and the brand innovations in North America Retail. Additionally, just as a reminder, the incentive reset will impact the corporate unallocated line in SG&A significantly, contributing to the increase.

I just want to clarify. Price/mix in the quarter for North America Retail was down around 3 points, and at the company level, excluding trade timing, price/mix was down 1%. So to clarify, it was down 3% in total, with 2% attributed to trade timing, thus excluding trade timing, price/mix was down about 1% in the quarter.

Our next question comes from Robert Moskow from TD Cowen.

Jeff, I wanted to know if you think pricing can get back into positive territory at some point during the course of the year. It’s difficult to make the numbers work without some degree of pricing power. Could you discuss your philosophy in that regard? Additionally, I wanted to ask about your assumptions regarding the potential size of the Fresh business in Pet. When you began pursuing this, the category was likely growing at around 25%, but our channels indicate it’s now more like 12% to 13%, including DTC. Does this affect your expectations for how big this business can become in the long term?

Yes. So Rob, a couple of responses to those important questions. Firstly, for a long-term algorithm to work in the food space, about half of your growth should come from volume and half from pricing. In recent years, we witnessed record inflation, relying heavily on pricing with little volume growth. Currently, we find ourselves in a time where there is more volume than price/mix given the consumer sentiment, and historically, these metrics tend to balance over time. Over the long term, your statement holds true; to achieve the desired P&L, a mixture of pricing and volume is essential. However, at present, we are focused more on volume, similar to our approach during previous inflationary periods. Regarding the Fresh Pet Food growth rates and your observations of slowing from 25% to 12%, I want to note that despite increased competition, the category size has doubled since we first examined it a few years back. Additionally, with the humanization trend of pets, particularly among younger consumers, we think there remains ample opportunity. The Fresh segment is currently a $3 billion segment and is projected to reach $10 billion in the next decade. We firmly believe that Blue Buffalo has the right to succeed in this space and will contribute to the growth of the overall category.

Adding to that, our data shows that the Fresh segment is currently valued at $3 billion and is projected to grow to $10 billion over the next decade. There is still considerable growth potential in this segment. We firmly believe Blue Buffalo is well positioned to lead in this space and spur on that category growth.

Our next question comes from David Palmer from Evercore ISI.

First, a quick one and a clarification off of a line in Slide #38. You said category growth below long-term expectations and similar to fiscal '25, reflecting lower price/mix. What was your category growth all in for fiscal '25? I ask because it looks like lately, the category growth on a weighted basis for your company would be over 2%, just looking at the MULO+ data, aligning with your algorithm. So it appears that the categories you operate in are performing decently. What kind of category growth assumptions are you observing?

Dave, it's Jeff Siemon here. Yes, that references our global growth exposure, combining our categories and geographies. In the U.S. human food, our categories are just shy of where we would expect long-term growth, with volume in line and price/mix slightly off our anticipated levels. On the Pet category front, it's growing, but not at our expected long-term rates—about 1% presently. We align expected long-term growth at 3% or more. Some of our international categories, especially China and Europe, are performing below long-term expectations as well, with China down and Europe trending slightly lower than our long-range targets. Altogether, this contributes to the remark on overall category growth across our enterprise being somewhat below the long-term expectation, hovering around that 2% to 3% growth rate.

If we keep it simple, considering your business in terms of achieving sales trends in line or better than your categories, in '26 versus '25, what do you identify as the must-get rights for this year? Which categories and brands do you anticipate will receive the most attention for improvement? It seems from your slides that you’ve highlighted potential in snacks, Totino's, and maybe even cereal. You mentioned the Pet category appears to be stabilizing. What are the key areas where you expect sales to enhance in '26?

Yes. I’m actually looking for improvement across the board, to be honest. I believe we can achieve this thanks to better marketing, improved new products, and value that is correctly positioned. To win, our biggest and most significant categories must enhance their performance. As you analyze our global brands and local gems, that’s where we expect to see improvements. Growth cannot be effectively driven by small businesses alone; successful performance in our largest and key businesses is essential. Broadly speaking, I anticipate improvements across the board, backed by our initiatives. We feel positive about how the year is starting and are eager to see how it unfolds. Importantly, we need to ensure we grow in line with our categories. If we execute well, we hope to drive those categories to grow faster, but that's not our primary expectation; we aim to be more competitive within our categories. Given our leadership in many spaces, if our marketing efforts prove effective, we can encourage a uptick in overall category growth, but we will not make that our core assumption.

Our next question comes from Scott Marks from Jefferies.

I have 2 quick ones. First, regarding innovation, we’ve seen products emphasizing protein take a central role. How are those performing with initial launches and markets? Secondly, regarding pricing investments, we’ve heard from some competitors about investing around key events versus a steady-state investment approach. What is your perspective on this, and do you observe varying consumer responses throughout the year at different times?

From a new product standpoint, you are spot on. Consumers are seeking protein, and we’ve seen mid-single-digit growth for protein items across grocery stores. While I'm biased, I can assure you we make protein taste incredibly good. Our plan this year involves almost $100 million in new ideas. We have significant protein entries across most of our major categories. For example, Cheerios Protein, which launched only 6 months ago, has significantly exceeded our expectations. We are actively bringing new SKUs to market now. This trend is here to stay, and we are well-positioned to capitalize on it.

And regarding pricing, how does that fit into a steady state versus seasonal approach?

As Jeff mentioned, our plan this year is to ensure we have the right pricing value alongside strong news, innovation, and advertising throughout the year. We understand that in tough economic times, consumers don't want to sacrifice during special occasions; they want their families to enjoy good holidays. Therefore, we’ll leverage seasonal opportunities where appropriate. We plan to have about 50% more seasonal innovation in our lineup this year, which is crucial to complementing our ongoing innovation and news throughout the year.

Our next question comes from Max Gumport from BNP Paribas.

You're clearly increasing your investment posture as you focus on positive volume growth. It’s promising to see positive volume performance in areas where you've invested, such as refrigerated dough, Totino's, and dog food. My question revolves around refrigerated dough specifically—while volumes have improved, they aren't surpassing price declines. I know your guidance indicates flat organic sales growth, so what gives you confidence that as you roll out these investments further, there will be a more favorable relationship between volume and price?

Yes, Max, you are correct. Our volumes have indeed increased ahead of our dollar share, and this is a trend we anticipated and modeled accurately. Our modeling, however, does not end with just how you invest in price. We do expect that during the first half of the upcoming year, our volume shares will surpass our dollar shares for the reasons you've highlighted. That's why maintaining our marketing investment and improving our new product profile as we approach the second half of the year is essential, particularly in Q4. We’ve increased new products by 25% in North America Retail and overall company growth by 30%. As we roll out our core news alongside stabilizing pricing, we then expect our dollar shares to begin to climb. Historical experience shows us that focusing on value and effective marketing stimulates consumers to return to shopping our products.

Regarding your guidance, it certainly implies a notable increase in investment for FY '26. Some of that seems related to the national expansion into the Fresh Pet Food segment. Can you quantify how much investment is aimed specifically at this launch?

That’s a fair question, but we're going to hold off on providing specific numbers for now. This is a national launch, and we fully intend to raise awareness among pet parents through significant marketing investment. We are committed to spending what is necessary to generate the initial trial because we believe that repeat purchases will be strong.

Our last question today will come from Michael Lavery from Piper Sandler.

Two quick ones. Following up on your comment about launch spending, how do you evaluate and balance organic innovation versus acquiring a Fresh Pet business? Given that the considerations for acquisition are extremely limited, how do you determine which route is more advantageous? What led you to revisit this launch right now after previous tests?

In general, we grow through our own brands organically, through acquisitions, or by utilizing existing equities in categories we wish to enter, like we did for protein in cereal. When evaluating a growth opportunity, we consider if we possess the right to win organically. For Blue Buffalo, the answer is a resounding yes. Our trials have validated this. We also assess our capabilities in regard to category expertise, as we have extensive experience with refrigerated products, dating back to the '50s. Our investment profile also plays a crucial role in determining whether we can successfully enter a segment. In this case, we are confident we have an offering that is significant and innovative, complementing the Blue equity. In contrast, in other instances, we have pursued M&A when we felt the need to strategically enter a new category, as we did with Blue Buffalo originally.

That's very helpful. Can I return to another comment you made about wanting improvement across the board? Where does salty snacks fit into that? Although it's a smaller aspect of your portfolio, it didn’t receive much mention. Is its performance more challenged due to discretionary spending, or is there another reason it isn't necessarily getting the same level of investment? What are your thoughts on that?

Thank you for the question. From a broader standpoint, we've noticed that in a tough economic environment, snacks are perceived more as discretionary purchases, which has posed challenges for our categories and businesses this year. Our focus now must be on enhancing the value proposition across our entire snacks portfolio while ensuring we execute the best marketing strategies and innovation to make our products appealing enough for consumers to purchase. As for salty snacks, it didn’t perform well this year due to inadequate participation in major growth trends. What's currently resonating in salty snacks involves bold flavors and proper value sizes, and of course, using news to bolster merchandising and displays. We're excited about our salty plans for this year; we renovated three of our top flavors, focusing on significant flavor intensity. We’re introducing intriguing spicy innovations, such as spicy dill Chex Mix and hot-and-spicy Chex Mix, as well as partnering with TABASCO on Bugles. We’re also adding value in tubs for Chex. I believe you’ll witness significant improvement in our salty snacks performance in the upcoming fiscal year.

Okay. I think we're going to go ahead and wrap there. Appreciate the time and attention. As always, we'll be available for follow-up calls today. Julienne, I'll pass it back to you.

This concludes today's conference call. You may now disconnect.