Amidst the current quarter’s earnings cycle, several companies have issued warnings about cautious consumers, a direct consequence of persistent high inflation. This trend isn’t limited to big-ticket items like cars and furniture; even everyday staples are experiencing a shift in consumer behavior.
J.M. Smucker Co, the parent company behind familiar brands like Smucker’s jelly and jams, Jif peanut butter, and Uncrustables, has reported stronger-than-expected earnings for the first quarter. However, the company’s lower guidance and cautious commentary about consumer spending have triggered a sell-off in its shares. This reflects investor concerns about the impact of inflation on consumer spending patterns. Smucker’s noted that consumers are cutting back on spending at convenience stores, a trend that has also been observed by Dollar General.
Smucker’s did highlight significant, double-digit growth in its Uncrustable brand, a packaged peanut butter and jelly sandwich popular in the frozen food aisle. However, the company acknowledged higher input costs in other areas, such as coffee, forcing price increases and subsequently impacting sales.
Analysts have adjusted their expectations for Smucker’s following the report, with firms like CitiGroup, BofA Securities, and TD Cowen lowering their price targets.
The warnings from Smucker’s and Dollar General suggest a broader trend of consumer belt-tightening in response to inflation. This could present a headwind for other food companies such as Mondelez International, Kraft Heinz, and General Mills, who might face similar pressures as consumers prioritize affordability.
The release of Price Consumption Expenditures (PCE) data, the Federal Reserve’s preferred gauge of inflation, is scheduled for Friday morning. This data will provide further insight into whether inflation is rising or cooling, offering valuable context for understanding the ongoing consumer behavior shifts.
