General Mills, Inc. (NYSE:GIS) stock edged lower Wednesday after the company reported fiscal 2027 first-quarter results that beat Wall Street estimates despite divestiture pressure and higher input costs.

Adjusted diluted earnings of 75 cents per share beat the 72-cent estimate. Sales of $4.39 billion also topped the $4.351 billion estimate.

Revenue fell 3% from a year earlier, mainly due to the U.S. yogurt divestiture. Organic net sales were flat.

Higher Costs Pressure Profitability

Operating profit fell 63% to $634 million. The year-ago quarter included an approximately $1 billion gain tied to the yogurt divestiture.

Adjusted operating profit declined 11% in constant currency. Adjusted gross margin fell 90 basis points to 33.3% as higher input costs weighed on profitability.

CFO Kofi Bruce said inflation was about 4% in the first quarter. He expects it to remain near that level through the third quarter before rising to roughly 6% in the fourth quarter.

General Mills expects full-year input-cost inflation at the high end of its 4% to 5% range. Freight, grains, packaging and Canadian tariffs are among the key pressures.

The company remains on track to generate $750 million in fiscal 2027 cost savings. It also expects gross margins to be roughly flat, excluding the impact of the 53rd week.

North America Retail Trends Improve

North America Retail sales fell 7% to $2.45 billion, while organic sales declined 3%.

However, retail sales growth improved by about two percentage points sequentially. Market-share trends also strengthened across most priority categories.

COO Dana McNabb said General Mills is "not all the way to growth yet." Cereal share declines narrowed to 0.1 percentage point from 0.9 percentage point a year earlier.

Management expects benefits from lapping last year's base-price investments beginning in the second quarter. Product mix, premium innovation and price-pack architecture should also support price/mix.

Totino's declines were cut by more than half. Fruit snacks remain under pressure from smaller emerging brands.

Pet Business Faces Wilderness Weakness

North America Pet sales were flat at $613 million.

Double-digit growth in cat food and low-single-digit growth in treats offset a high-single-digit decline in dog food.

Management identified Wilderness as the main challenge in dry dog food. The company said the brand needs changes across its products, packaging, marketing and communication.

North America Foodservice sales rose 1% to $523 million, with organic sales up 4%. International sales increased 4% to $794 million.

Guidance Reaffirmed

General Mills reaffirmed its fiscal 2027 adjusted EPS outlook of $3 to $3.20, compared with the $3.07 estimate.

The company expects organic sales to range from a 1.5% decline to 0.5% growth. Adjusted operating profit is expected to fall 8% to 13% in constant currency.

Free cash flow conversion remains targeted at about 95% of adjusted after-tax earnings.

Operating cash flow fell to $298 million from $397 million a year earlier. General Mills ended the quarter with $433.1 million in cash and cash equivalents.

Management said leverage remains slightly above four times net debt-to-EBITDA. It expects to take at least a couple of years to return to its three-times target.

General Mills Price Action

GIS Price Action: General Mills shares were down 0.83% at $35.15 at the time of publication Wednesday, according to market data.