General Mills Sheds Brazil Business and Pushes Premium Categories as Stock Hovers Near Decade Lows

General Mills exits Brazil to focus on premium categories; shares near decade low after Q3 sales fell 8% and EPS dropped 37%.

General Mills is betting on a leaner, higher-margin portfolio to pull its shares out of a deepening slump. The company has struck a deal to sell its Brazilian operations to local player 3corações, offloading regional brands like Yoki and Kitano that together generated roughly $350 million in revenue last fiscal year. The transaction is expected to close by the end of 2026, pending regulatory approval, and marks the latest step in a restructuring drive that has turned over nearly a third of the company’s portfolio since 2018.

Management’s stated goal is to concentrate on more profitable global categories, including premium ice cream, Mexican foods and pet food. The pet business itself has been a sore spot: inventory glitches at retailers and a shift from specialty pet stores toward mass-market chains and online channels have weighed on sales. The Brazil exit is part of a broader effort to boost operating margins, but the market so far remains unconvinced.

Shares on Thursday traded between $33.47 and $34.37, barely above the 52-week low of $33.37 and a far cry from the year’s high of $55.35. Volume came in slightly below the daily average. The stock now sits near levels not seen since 2010, a decline that has pushed the dividend yield above 7%. The company paid its regular quarterly dividend of $0.61 a share today, and the payout ratio sits at roughly 60% — covered by earnings but offering a thinning cushion.

Analysts are growing more cautious. Piper Sandler cut its price target to $41 from $45, while Barclays had trimmed its own expectations days earlier. Wells Fargo lowered its target to $33 with an underweight rating, and Deutsche Bank set a fair value of $32 with a hold recommendation. Consensus on Wall Street has settled at “Hold” since May 11.

The skepticism stems from a weak third quarter. Net sales fell 8% to $4.4 billion, with divestitures and acquisitions lopping six percentage points off the top line. Organic sales contracted 3%, hurt by adverse weather and inflated retailer inventories. Adjusted operating income tumbled 32% on a currency-neutral basis to $547 million, and adjusted earnings per share dropped 37% to $0.64. The adjusted gross margin narrowed 280 basis points to 30.6% of sales.

Despite the deterioration, management reaffirmed its fiscal 2026 outlook. Organic sales are expected to land between minus 1% and plus 1%. Adjusted operating income and adjusted EPS are both forecast to decline 10% to 15% on a constant-currency basis, while free cash flow conversion should hit at least 95%. The company plans to lean on product innovation and stepped-up promotions in the fourth quarter, which ends in July 2026.

On the product side, General Mills is accelerating development. Sales from new items are projected to rise roughly 25% in the coming fiscal year, with a focus on protein-rich snacks and bolder flavors. And by 2027, the company intends to remove artificial colors from its entire US retail portfolio. On the sustainability front, its latest report shows raw materials now sourced from more than 800,000 hectares of regenerative farmland, and greenhouse gas emissions along the value chain have fallen 14%.

For income-focused investors, the 7% yield remains a key draw, but it is a byproduct of price decline rather than dividend growth. The next major catalyst comes at the end of June, when General Mills reports its fourth-quarter results. Until then, the market will be watching for tangible progress on inventory normalization, topline momentum and margin recovery — the three pillars that could finally justify a rerating.