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

Sep 18, 2019 • 08:30 am ET

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

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Q & A
Executive
Jeffrey L. Harmening

first quarter and that's not -- that was not unexpected because we have seen the economy slowing there. It's still growing. So when we say the growth has slowed it has slown but it is still growing, which I think is important. And we've adjusted some of our tactics for our Haagen-Dazs shops to drive more traffic starting in starting in the second quarter. And then on Wanchai Ferry we took prices at the end of last year because we saw the African swine fever and the pork prices go up. So we took some pricing, and we did so a little bit ahead of our competition. We've seen them starting to take pricing there.

So as we head into the second quarter we see improvement in our Wanchai Ferry business. And so in China, we saw our business in China decline a little bit, but not really a lot behind our expectations because we saw these macro forces at play. And so our ability to get our China business back to growth really doesn't depend on a change in the macro environment. It really realize on tactics we've taken to drive more consumers in store and on our competition catching up with us on pricing on Wanchai Ferry, which is why we have confidence that we can improve that business heading into the second quarter.

Analyst
Bryan Spillane

Great. Thanks, everyone.

Executive
Jeffrey L. Harmening

It's time for one more.

Operator
Operator

Our next question comes from the line of Steve Strycula with UBS. Your line is open. Please proceed.

Analyst
Steve Strycula

Hi, good morning, everybody.

Executive
Jeffrey L. Harmening

Hi, Steve. Good morning.

Analyst
Steve Strycula

So one quick question for Don. And then, and then a follow-up. So on the gross margin piece Don if we strip out the Blue Buffalo contribution is it right to think that gross margins were up roughly about 30 basis points in the first quarter on a like-for-like basis. And given the brand building that you're doing. Can you speak to what specifically it is throughout the balance of the year? And why that steps up? And should that mean that maybe the run rate for the balance of the year is closer to like flattish. And then I have a follow-up. Thanks.

Executive
Donal L. Mulligan

That's the math is right on Q1. So the $53 million step-up in inventory rolling over is about 130 basis points, so it does account for most of the gross margin improvement. As the year unfolds we're going to -- we're seeing a slight step up in our media, that will increase, we're also keen to build capabilities around data and analytics to get deeper in that area. I think we talked about that a little bit in July, we've built e-commerce capabilities, we continue to invest there. We can do invest in our strategic revenue management all around how we manage and drive decisions through data, and you'll continue to see those capabilities being invested behind as the year unfolds.

Analyst
Steve Strycula

Okay. And my follow-up for Jeff. So do we see that incremental spend for brand