Shares of General Mills (GIS) sunk in late morning trading after the company reported quarterly results, including net sales for its North America Retail segment that fell 2% from the year-ago period.

QUARTERLY RESULTS AND GUIDANCE: General Mills reported first-quarter adjusted earnings per share of 71c, beating analysts’ consensus estimates of 63c, while sales of $4.1B were essentially in line with the consensus forecast. However, the company said net sales in North America, its biggest region, fell 2% to $2.39B, with net sales down 4% in U.S. Snacks and down 2% each in U.S. Meals & Baking and U.S. Yogurt. General Mills said its pet-food division reported sales of $343.4M, up 14% on a pro forma basis. General Mills acquired Blue Buffalo earlier this year for $8B and said its net interest expense was $134M in the quarter, primarily driven by financing related to the acquisition. Looking ahead, General Mills reaffirmed fiscal 2019 targets, including adjusted EPS flat to down 3% from the base $3.11 earned in fiscal 2018, organic net sales flat to up 1%, net sales up 9%-10% including the impact of the Blue Buffalo deal and constant currency adjusted operating profit up 6%-9% from the base of $2.6B reported in FY18.

EXECUTIVE COMMENTARY: In a statement, Chairman and Chief Executive Officer Jeff Harmening commented that FY19 is “off to a good start” and said the Blue Buffalo transition is “progressing well”. General Mills expects double-digit top and bottom-line growth for the Blue Buffalo business this year, excluding acquisition-related charges. On its quarterly earnings conference call, CFO Donal Mulligan said he expects price/mix to improve as the year unfolds, and that operating margins will be down “somewhat” for the year. He also thinks there will be “a little bit more pressure” on gross margin from where the company originally expected. For the year, General Mills expects input cost inflation will be 5% of the cost of goods, one point above FY18 levels.