General Mills earnings flash a warning sign for the economy

As the year winds down, General Mills’ latest earnings offer a sobering read on the U.S. consumer and the economy writ large. The headline numbers show clear strain, with organic net sales falling 1%, adjusted operating profit dropping 20%, and margins compressing across the company’s core North America business.

The writing on the wall? Lower-income and more middle-class shoppers are increasingly reaching for generic store brands and looking to cut their grocery bills any way they can, which is bad news for the maker of Cheerios, Gushers, and Nature Valley granola bars.

Of course, that also means that results are less a company-specific stumble than a reflection of where the economy is landing after a turbulent five years.

Consider General Mills’ five-year stock arc, which mirrors the broader consumer story.

After the pandemic-era “eat at home” boom, inflation allowed (and forced) brands to raise prices. Now, even as the pace of inflation growth steadies, consumers nevertheless feel cautious — not least because the jobs market feels so sluggish and tricky. All of which means General Mills now finds itself contending with lower volumes, a need for heavier promotions, and margin pressure as shoppers on the wrong side of the K-shaped divide trade down or buy less.

This quarter didn’t reverse that trend so much as confirm it, and the stock’s modest 2% pre-market pop on Wednesday likely reflects relief that conditions aren’t deteriorating faster, rather than renewed confidence in growth — innovations like “pancake puffs” notwithstanding.

The pressure is most acute in North America, where operating profit fell more than 20% year over year. That lines up with what major grocery partners like Kroger have been describing in explicit detail on their earnings calls: lower- and middle-class shoppers spending less per visit, pulling back on discretionary items, and leaning harder on promotions and store brands. As Kroger’s interim CEO Ronald Sargent put it, “we’re seeing this economy where high income premium shoppers, they continue to spend while lower income customers are pulling back more aggressively.” The pause in SNAP benefit distributions during the government shutdown couldn’t have helped, though General Mills didn’t allude to it directly.

This points to a thorny and volatile macro backdrop. The U.S. economy may have thus far avoided the worst fears tied to the largest tariff increases in decades. But it’s also showing few signs of renewed momentum. Effective tariff rates are now at levels not seen since the 1930s, inflation pressures remain troublesome, and the Federal Reserve has signaled it will move cautiously after three interest rate cuts this year. Meanwhile, the economy grows ever more bifurcated, with no less than Fed Chair Jerome Powell identifying the trend in earnings announcements. General Mills’ own may now become one more proof point.