General Mills, Inc. (NYSE:GIS) Q1 2020 Earnings Conference Call - Final Transcript

Greetings, and welcome to the First Quarter Fiscal 2020 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded Wednesday, September 18, 2019.

I would now like to turn the conference over to Jeff Siemon, Vice President of Investor Relations. Please go ahead.

Thanks, Melissa, and good morning everyone. Thanks for joining us for the General Mills first quarter earnings call. I'm here with Jeff Harmening, our Chairman and CEO; Don Mulligan, our CFO; and Jon Nudi, who leads our North America Retail segment who is here for the Q&A portion of the call. Before I turn it over to them. Let me cover a few housekeeping items.

A press release on our Q1 results this morning was issued over the wire services, and you can find the release and a copy of the slides that supplement our remarks this morning on our Investor Relations website. Please note that our remarks this morning will include forward-looking statements that are based on management's current views and assumptions. The second slide in today's presentation was factors that could cause our future results to be different than our current estimates.

And with that, let me turn it over to my colleagues beginning with Jeff.

Thank you, Jeff and good morning everyone. Our first quarter net sales performance included encouraging improvement in North America Retail and strong growth in our Pet segment driven by good innovation and effective brand building investment. We got off to a slower start in our other segments and we expect top line improvement in those segments and for the company starting in the second quarter.

On the bottom line, we delivered profit and earnings growth ahead of our expectations while continuing to invest in our brands and our capabilities. We remain on track to deliver our fiscal 2020 goals, including accelerating our organic sales growth, maintaining our strong margins, and reducing our leverage.

Slide 5 summarizes our first quarter financial results. Net sales totaled $4 billion, down 2%. Organic net sales declined 1% with lower volume, partially offset by a positive price mix across all operating segments. Adjusted operating profit grew 7% in constant currency driven by a one-time purchase accounting adjustment in the Pet segment in last year's first quarter. Adjusted diluted earnings per share totaled $0.79 and grew 13% in constant currency driven by higher profit and below the line favorability.

As a reminder, we outlined three key fiscal 2020 priorities on our Q4 earnings call. First, we'll accelerate our organic sales growth. We're working to improve growth in North America retail by maintaining momentum on Cereal and U.S. Yogurt and U.S. Snacks. We're also focused on driving another year of strong growth on Blue Buffalo. We delivered solid results for these segments in the first quarter. The results in our remaining three segments were below our expectations. In a few moments, I'll share how will step up the company's organic growth rate starting in Q2.

Our second priority is to maintain our strong margins,