Processed food giant General Mills (NYSE:GIS) got a jump on the earnings-season flood this morning by reporting its fiscal-first-quarter numbers. Competitor ConAgra Foods reports tomorrow morning, so we'll have something solid to compare its results to. But today, it's all about General Mills.

According to Yahoo! Finance, analysts were looking for $0.69 in per-share earnings on $4.4 billion in sales for the first quarter of General Mills' fiscal 2015. That estimate was about flat to last year's $0.70 and $4.37 billion performance. However, General Mills missed estimates for this quarater, producing $0.61 per share on $4.27 billion in revenue in the quarter. Overall, sales were down about 2% from last year. 

Digging deeper
General Mills seemed to struggle in the U.S. This was due to higher merchandising expenses and sluggish industry trends, both of which bit into profits. While management maintained its full-year earnings guidance, it acknowledged in its press release that the U.S. market is "more challenging than expected."

Domestic sales were about $2.44 billion in the quarter, down 5% from last year. This was due to 2% lower pound volume and higher merchandising expenses. Gross margin was down to 33.7%, 320 basis points below last year. This isn't great, but it's not the end of the world.

Internationally, General Mills did better. Sales grew 2% to $1.35 billion, about 32% of its total top line. If we normalize all the negative currency exchange effects, this segment was up 6%, according to the company. Latin America was particularly strong with a 20% increase, while sales in the Asia-Pacific region and Europe were both up 4%.


Despite the hiccups, cash flow was strong in the first quarter. Operating flow equaled more than $325 million, dividends amounted to $254 million, and management bought back almost 9 million shares at an average price of roughly $51.33. (Shares closed yesterday at $53.18.) Management is also looking to eliminate more costs via its "holistic margin management" program. The company says holistic margin management "call[s] on us to understand the drivers of value in our brands and to eliminate non-value added costs and activities." The company says we should expect to see $400 million saved in supply chain costs in 2015 and another $100 million by its 2017 fiscal year.

Just another link in the chain
As I've said before, shareholders who plunk their cash into General Mills generally know what they're going to get. Bigger picture, this quarter falls right in with the company's plans and strategy.

Despite some U.S. weakness, it wasn't that bad of a quarter. In this  three-month period, General Mills unveiled more than 250 new items worldwide. In the U.S., consumers can now find gluten-free Chex oatmeal, Cheerios Protein cereal, Fiber One Streusel snack bars, and new flavors of Yoplait Greek yogurt. Internationally, there are new flavors of Haagen-Dazs ice cream in Europe and Betty Crocker desserts in Brazil. Based on consumer trends, management has focused its product development on high-protein, gluten-free offerings. From personal industry experience, these are the fastest-growing categories in all types of retailers.


What the market thinks
General Mills stock was down about 3.5% around noon. I think that's an overreaction. Right now, those selling shares are probably disappointed in the numbers and the performance in the U.S. It also didn't help that analyst firm Societe Generale downgraded the stock early this morning before earnings.

But General Mills did reaffirm guidance for the year -- including net sales expected to grow at a mid-single-digit rate in constant currency -- unveiled many new products, and continued to perform internationally. There is also plenty to like in terms of cash flow, dividends, and buybacks. After all, management reduced the share count by 5% and paid out more than $250 million in dividends during the quarter.

Foolish final words
Going forward, I would expect more quarters like this from General Mills. While the U.S. retail business will probably perk up a bit, the domestic market is saturated and opportunities exist elsewhere. So a blip in U.S. retail isn't a huge surprise. I'm more interested in its continued cost management, savvy brand acquisitions (like the planned acquisition of Annie's), product innovation, and international performance. To me, the rest of it will ebb and flow.

General Mills remains a rock-solid blue chip stock, with a dominant brand presence in many key consumer food categories. This lone quarter doesn't change a thing.

Wade Michels has no position in any stocks mentioned. The Motley Fool owns shares of Annie's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.