General Mills (NYSE:GIS) issued a cautious outlook for its new fiscal year, forecasting flat-to-negative organic sales and a steep drop in adjusted operating profit as it contends with weakening consumer demand and rising input costs tied to U.S. tariffs. As a result, the company’s shares fell over 3% intra-day today.

The packaged food giant expects organic net sales to range from down 1% to up 1%, while adjusted operating profit is projected to fall 10% to 15% in constant currency from last year’s $3.4 billion base. The company attributed the earnings pressure to a combination of tariff-driven cost inflation, elevated strategic spending, and a corporate incentive reset—factors it says will outweigh benefits from cost-saving initiatives and an extra fiscal week.

General Mills also acknowledged that category growth in fiscal 2026 is likely to underperform its long-term expectations, pointing to a tough consumer environment where budget-conscious shoppers are pulling back amid economic uncertainty and price fatigue.

Despite the near-term headwinds, the company plans to make sizable investments in growth areas, particularly in its U.S. fresh pet food business, as well as in value-focused innovation and brand support.

In its fiscal fourth quarter, net sales declined 3.3% year-over-year to $4.56 billion, just shy of consensus estimates, while adjusted EPS of $0.74 came in slightly ahead of the expected $0.71. Still, the soft guidance and margin pressures weighed on sentiment, underscoring the challenging road ahead for consumer staples firms navigating inflation and shifting shopper behavior.