Key Takeaways
- General Mills cut its full-year sales and earnings forecast, noting weak consumer sentiment and higher costs.
- Shares of rivals also dropped, indicating broader pressure across packaged foods.
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General Mills hasn’t been eating its Wheaties.
Shares of General Mills (GIS) were down 8% in late trading Tuesday after the company behind Wheaties and Cheerios cut its full-year sales and profit forecast, citing a “challenging” consumer environment.
The company expects organic net sales to fall between 1.5% and 2% this year. In December, General Mills forecast sales could grow up to 1% this year. Adjusted earnings per share are expected to decline between 16% and 20%, compared with a prior forecast of a 10% to 15% decline.
Why This Matters
Inflation and reduced government benefits are pushing low- and middle-income shoppers toward discounts, which is hurting makers of packaged food.
“Weak consumer sentiment, heightened uncertainty and significant volatility have weighed on category growth and impacted consumer purchase patterns, resulting in a slower pace and higher cost of volume recovery than initially expected,” the company said in a press release on Tuesday.
Chief Executive Officer Jeff Harmening, speaking at a conference on Tuesday, said persistent inflation, SNAP benefit reductions and geopolitical uncertainty “have led to significant consumer stress, especially for the middle- and lower-income groups.” As a result, he said, consumers are increasingly buying goods on sale, rather than at full price.
The sell-off in shares of General Mills paced broader declines for packaged food giants on Tuesday. Shares of Oreo and Ritz parent Mondelez International (MDLZ) were down 5% recently. Kraft Heinz (KHC) stock was also off 5%, while Campbell’s (CPB) dropped more than 7%.
Related Education
Low- and middle-income consumers have been hit particularly hard in recent years by surging inflation and a stalled job market. By comparison, the finances of upper-income consumers with more exposure to the stock market have been buoyed by a years-long bull market. In the most recent University of Michigan Survey of Consumers, there was about a 20-point gap between the sentiment of respondents without stock holdings and those with the largest stock holdings.