Are Food Stocks Cooked? By Aaron Back

This is Heard on the Street editor Aaron Back, filling in for Spencer Jakab this week. Stock index futures are trading down slightly early Wednesday following yesterday's tech selloff . Retailers Target, TJX and Lowe's are all reporting today. This afternoon will see the release of the Federal Reserve's minutes from their last meeting, setting the stage for the Fed's closely watched Jackson Hole gathering starting tomorrow.

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America's packaged-food companies have traditionally been the kinds of stocks people turn to for protection during tough times. But if the economy goes south at some point, they aren't likely to play that role again.

Companies like Kraft Heinz, General Mills and Campbell's can't seem to catch a break lately. Along with J.M. Smucker and Conagra Brands, this group of major food companies saw comparable sales fall by an average of 1.7% from a year earlier in their latest reported quarters. Four of the five posted declines, with only Campbell growing comparable sales by 1%.

So far this year, their stocks are down by an average of 16%. That compares with a 9% rise in the S&P 500, and a 6.5% rise in that index's consumer-staples group. Smucker will report earnings on Aug. 27.

The industry is getting hit from all sides. Tariffs and and other inflationary pressures keep pushing up costs for ingredients and packaging materials. But consumers who are fed up with years of cumulative price increases seem unwilling to pay much more.

Conagra chief Sean Connolly, whose brands include Duncan Hines and Marie Callender's, says the company's current fiscal year will be the sixth straight, going back to before the pandemic, where inflation pressures are above historical norms.

As a result, brands now have little choice but to stop passing on costs and take hits to their margins. Kraft Heinz, for instance, says it expects inflation in its costs this year of 5% to 7%; it will only pass on 1% to consumers in higher prices.

At the same time, poorer families will now face cuts to the Supplemental Nutrition Assistance Program-also known as food stamps-from the just-passed budget and tax bill. Mizuho analyst John Baumgartner estimates assistance will be cut by $186 billion over the next decade, or around 20%. He forecasts that could reduce at-home food sales by one percentage point over the next twelve months, similar to what happened when Covid-era enhancements to SNAP benefits expired in 2023 .

Finally, companies are contending with a new wave of health concerns over their products. While that is nothing new to the industry, this time feels a little different thanks to the added political pressure of the so-called Make America Healthy Again movement. And it comes at a time when their financial room to maneuver is limited.

Many are turning to increasingly radical solutions. Kellogg has already split up, and both its halves are now set to be acquired by private companies . Kraft Heinz is considering a breakup as well.

If those standalone companies get snatched up, it could mean a payday for investors. But Kraft Heinz shareholders could also be waiting a long time for such a happy ending.

If a creeping privatization becomes the best conceivable outcome for these companies, the broader message is that they are becoming uninvestable-at least for public-market investors. They are no longer havens.

Stocks I'm Watching

Lowe's : Earnings are due from the home-improvement retailer. T.J. Maxx owner TJX and Target will also report before markets open, as will Analog Devices .

Toll Brothers : The homebuilder posted better-than-expected revenue but cut its annual delivery guidance. Shares fell 2.5% in premarket trading.

La-Z-Boy : The furniture maker's adjusted earnings disappointed investors, as did its sales guidance for this quarter. Shares tumbled by one-quarter ahead of the open.

Alcon : The Swiss eye-care company trimmed its annual guidance, saying it expects a $100 million hit from U.S. tariffs. Its American depositary receipts slid 10% premarket.

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About Me

My name is Aaron Back and I've been writing about markets and economics for nearly two decades. I am currently the editor of The Wall Street Journal's Heard on the Street column. I've been writing for the Heard column since 2013, in both Hong Kong and New York. Prior to that, I was a reporter and the deputy China bureau chief for Dow Jones Newswires in Beijing.

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August 20, 2025 06:26 ET (10:26 GMT)

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