The COVID-19 pandemic drove massive growth for retailers in the food industry as people stocked up on groceries, quick meal kits, processed food products and snacks during the lockdown period. Most companies reported strong results for their retail channels, which helped offset declines in their foodservice channels.
However, analysts are less enthusiastic on the outlook for some of these food retailers as they believe the massive uptick seen during the earlier part of the year amid the health crisis is likely to slow down or normalize after the pandemic subsides. Here are three stocks that face this possibility:
Kroger
The Kroger Co. (NYSE: KR) saw increased demand and growth in market share during the pandemic. Higher at-home food consumption drove growth in basket sizes and the company recorded an 8.6% growth across its brands with strong demand for fresh produce, frozen grocery and plant-based foods.
The company’s efforts to expand its offerings and improve its fulfilment options to provide maximum convenience to customers are likely to boost sales during the holiday season. However, there is concern that once the health crisis passes, this growth is likely to decelerate. This was fueled in part by Kroger missing revenue estimates for its most recent quarter.
Campbell Soup
Campbell Soup Company (NYSE: CPB) saw strong demand for its soups, snacks and meal products as people dined more at home. The company witnessed increased household penetration and strong retention rates for its most recent quarter and believes the rise in at-home food consumption will continue to drive growth forward.
Even as Campbell remains upbeat about future demand trends, the company too faces the possibility of demand normalizing in a post-pandemic world. The sequential slowdown in organic sales witnessed in the first quarter of 2021 as well as the lower-than-expected guidance for adjusted EPS left investors unimpressed earlier this month. Campbell expects adjusted EPS of $0.81-0.83 while analysts have forecasted EPS of $0.84.
Tyson Foods
Tyson Foods (NYSE: TSN) saw momentum in its retail and ecommerce channels driven by increased at-home food consumption. During its most recent quarter, ecommerce sales jumped 126% and the company saw sales growth across its beef, pork and prepared foods divisions. Alternative protein is another area with meaningful growth potential with retail sales for plant-based products rising over 250% in the past year.
Looking ahead, Tyson faces uncertainty from the trade environment, vaccine availability and potential impacts from the pandemic, if any. The company expects margins from its beef and pork segments to moderate towards more historical levels as industry capacity, live animal supplies and finished goods inventories balance out.