PBJ - Consumer jolt: General Mills CEO says there is no disinflation yet with food prices

2023-06-28 14:03:21 ET

Food stocks fell on Wednesday after General Mills ( NYSE: GIS ) missed revenue and organic sales expectations with its earnings report .

A 6% drop in volume during the quarter cut into the 11% price/mix advantage the company realized in comparison to a year ago. In general, packaged food companies have continued to hike prices to offset higher wage, raw materials and transportation costs.

Looking ahead, General Mills ( GIS ) CEO Jeffrey Harmenin said on the earnings conference call ( transcript ) that inflation is expected to moderate, but stay above the normal historical levels. He dismissed the idea that disinflation is around the corner. "There have been a lot of commentary about disinflation or going negative, but we don't actually see that. And it's driven by labor costs inflating," he stated. The food giant expects to raise pricing again this year due to persistent inflation.

Analysts think the GIS report is being viewed as one of the first notable examples of consumers pushing back on pricing for popular brands and looking at cheaper options.

General Mills ( GIS ) was down 4.70% at 1:50 p.m. Other decliners in the packaged food sector in Friday afternoon trading included J.M. Smucker ( SJM ) -4.21% , Conagra Brands ( CAG ) -3.11% , Hormel Foods ( HRL ) -2.89% , B&G Foods ( BGS ) -2.77% , Campbell Soup ( CPB ) -2.27% , Lifeway Foods ( LWAY ) -2.26% , and Kellogg ( K ) -2.18% . The Invesco Dynamic Food & Beverage ETF ( PBJ ) is also underperforming on the day with a 1.18% swing lower.

More on food stocks:

• General Mills: Promising Opportunity With A High Price Tag
• Campbell Soup: Buy The Drop On This Consumer Staple
• Conagra: Our Investment Thesis Became Less Bullish, Rating Downgrade
• Seeking Alpha Quant Ratings across the food sector

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