While the company celebrated multiple financial successes achieved in fiscal 2023, weak volume trends at General Mills, Inc. loomed ominously at the start of the company’s new fiscal year.

Executives at the company spoke hopefully about prospects for stemming the decrease in sales volume in fiscal 2024, but the investment community appeared skeptical. In trading on Wall Street June 29, General Mills’ shares dropped 5%, closing at $76.72, down $4.18 from the day before. At the closing price, the company’s shares were down 16% from the recent high of $90.89 reached in mid-May.

Net income at General Mills in the year ended May 28 was $2.59 billion, equal to $4.36 per share on the common stock, down 4% from $2.71 billion, or $4.46 per share, in fiscal 2022. Net sales were $20.09 billion, up 6% from $18.99 billion the year before. Adjusted earnings per share rose 10% in constant currency.

While sales for the year were up 6% from fiscal 2022, volume was down 8%, with price/mix contributing 15 points of growth and foreign exchange a 1% headwind.

“We delivered excellent results in fiscal 2023, including generating double-digit growth in organic net sales and constant-currency adjusted diluted EPS and exceeding $20 billion in annual net sales for the first time in our company’s history,” said Jeffrey L. Harmening, chairman and chief executive officer of General Mills.

In comments June 29 to investment analysts, Mr. Harmening noted that fiscal 2023 was the fifth straight year General Mills has achieved or topped its targets for sales and earnings growth. Reviewing the company’s results last year, he said General Mills pursued its Accelerate strategy relying on competing effectively in its categories, investing in the future and continuing to reshape its portfolio.

The company said it held or gained share “in 53% of our priority businesses globally,” though the figure incorporated an adjustment for “an unusual competitive dynamic in cereal last year” and viewed the category on a two-year basis. The company’s largest competitor, Kellogg Co., endured supply disruptions because of a fire and then a work stoppage in 2021 and 2022, skewing the comparison.

With the adjustment, Mr. Harmening said General Mills gained share in cereal, refrigerated dough, fruit snacks, hot snacks, soup and seasonings.

In terms of investing for the future, Mr. Harmening said the company’s media spend in fiscal 2023 was 35% greater than before the pandemic and that General Mills added production capacity for “constrained platforms,” including fruit snacks, pet foods and hot snacks.

Since fiscal 2018, General Mills has “reshaped more than 20% of our portfolio,” Mr. Harmening said. The past year featured one acquisition and two divestitures.

For fiscal 2024, General Mills is predicting net sales growth of 3% to 4%, adjusting operating profit growth of 4% to 6% and adjusted earnings per share growth of 4% to 6%, from a base of $4.30 in fiscal 2023.

Keys to the company’s performance in the new year will be the economic health of consumers, easing cost inflation and a more stable supply chain environment, the company said.

“For the full year, input cost inflation is expected to be 5% of total cost of goods sold, driven primarily by labor inflation that continues to impact sourcing, manufacturing, and logistics costs,” the company said.

Mr. Harmening pointed out the 5% cost inflation projected for this year compares with 13% in fiscal 2022.

“While certain commodity spot prices are down from their highs, we continue to see labor as the main source of ongoing inflation, showing up in our suppliers’ conversion costs, at our co-packers facilities, in our own plants and downstream in our warehousing and logistics network,” he said.

He said supply chains are currently in line with pre-pandemic levels, adding that General Mills’ customer service levels have climbed to the low 90% range. Capacity constraints in products such as fruit snacks, cereal and hot snacks have kept service levels from reaching the upper 90% range, Mr. Harmening said.

Kofi A. Bruce, chief financial officer, drilled more deeply into sales volume trends and offered an upbeat view of prospects for the new year. He said a reduction in retailer inventory was a significant headwind for volume in fiscal 2023, shaving three points from the company’s sales growth in the fourth quarter alone. He and Mr. Harmening said such reductions were not expected to be a problem this year.

Price/mix contributions to sales growth will be smaller in fiscal 2024 than in fiscal 2023, Mr. Bruce said. Some benefits in the new year will be gained from pricing actions taken later in fiscal 2023. Volume trends should benefit from easing inflation and other factors, he said.

“We see three key drivers of improved organic pound volume performance in fiscal 2024 relative to the decline we posted in fiscal 2023,” he said. “First, we expect less of a headwind from pricing as our price/mix steps down significantly from fiscal ‘23 to fiscal ‘24. Second, a more stable supply chain should allow for much stronger commercial activity, including increased distribution, innovation, brand building investment and quality merchandising. Third, we have added capacity on many constrained platforms, including fruit snacks, pet food and hot snacks.”

Several analysts posed questions about expectations for volume in the new year. Mr. Harmening predicted volume decreases in fiscal 2024 would be more modest than in fiscal 2023.

“We said our top line will grow 3% to 4% (in fiscal 2024), and we’ll have mid-single-digit inflation, roughly 5%,” he said. “And so we do see pricing this year. I’m confident that our pounds will be better in fiscal ‘24 than they were in fiscal ‘23, which is to say they’ll certainly decline less. Whether they get to positive or not? We’ll see. That’s a really difficult thing to call, especially because of the mix factor involved.”

In the fourth quarter of fiscal 2023, General Mills’ net income was $614.9 million, or $1.04 per share, down 24% from $822.8 million, or $1.36 per share. Sales were $5.03 billion, up 3%. Adjusted net income was up 1% in constant currency. Sales volume fell 6% in the fourth quarter, with a 10% positive contribution from price/mix and a 1-point decrease from foreign exchange.