Fiscal 2020 Outlook
For the fourth quarter of fiscal 2020, General Mills expects to see a step up in organic net sales growth, driven in part by an extra month of results for the Pet segment as the company aligns that business to the General Mills fiscal year end. Fourth-quarter reported net sales will also benefit from a 53rd week.
The impact of the recent COVID-19 virus outbreak on the company's full-year fiscal 2020 results is still uncertain. The company's current outlook incorporates increased orders from retail customers in North America and Europe subsequent to the end of the third quarter in response to increased consumer demand for food at home, as well as headwinds in Häagen-Dazs shops and other foodservice channels resulting from lower consumer traffic. The most significant element of uncertainty in the company's full-year outlook is the intensity and duration of increased demand for food at home across all its major markets. Additionally, the company's outlook assumes its supply chain continues to operate with minimal disruption for the remainder of fiscal 2020.
Based on its year-to-date performance and fourth-quarter expectations, General Mills updated its full-year fiscal 2020 targets:
- Organic net sales are still expected to increase 1 to 2 percent. The combination of currency translation, the impact of divestitures executed in fiscal 2019, and contributions from the 53rd week in fiscal 2020 are expected to increase reported net sales by approximately 1 percentage point.
- Constant-currency adjusted operating profit is now expected to increase 4 to 6 percent from the base of $2.86 billion reported in fiscal 2019, which is ahead of the previous range of 2 to 4 percent growth. The primary drivers of the increased outlook for constant-currency adjusted operating profit are increased Holistic Margin Management productivity savings, a modest reduction in the outlook for input cost inflation, and continued tight control over administrative expenses. The benefit of the extra fiscal week is being reinvested in capabilities and brand-building initiatives to drive improvement in the company's organic sales growth rate in 2020 and beyond.
- Constant-currency adjusted diluted EPS are now expected to increase 6 to 8 percent from the base of $3.22 earned in fiscal 2019, which is ahead of the previous range of 3 to 5 percent growth. The primary drivers of the increased outlook for constant-currency adjusted diluted EPS are the increased forecast for constant-currency adjusted operating profit and a reduced expectation for full-year net interest expense.
- The company continues to expect free cash flow conversion of at least 105 percent of adjusted after-tax earnings.
- Currency translation is expected to have an immaterial impact on fiscal 2020 adjusted operating profit and adjusted diluted EPS.