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The rise of weight loss drugs poses a threat to General Mills' sales volume.
Persistent inflation has forced low-end consumers to switch to cheaper private labels.
Wall Street expects negative EPS growth until at least 2028.
General Mills Company Overview
Zacks Rank #5 (Strong Sell) stock General Mills, Inc ((GIS - Free Report) ) is a global manufacturer and marketer of branded consumer foods sold primarily through retail stores. The company also operates a commercial food service segment. GIS’s primary product categories include ready-to-eat cereals, convenient meals, snacks, premium ice creams, baking mixes, and ingredients. Its products are sold across grocery, club, e-commerce, and other formats in the United States as well as in select international markets. Additionally, General Mills entered the pet food market with its acquisition of Blue Buffalo in2018 and Tyson Foods’ pet treats business in 2021.
The GLP-1 Headwind
GLP-1 weight loss drugs from Eli Lilly ((LLY - Free Report) ) and Novo Nordisk ((NVO - Free Report) ). GLP-1 drugs have proven to have massive positive effects on diabetes, weight loss, and heart disease. Unfortunately for General Mills, GLP-1s quell the users’ appetites, making them less likely to indulge in the packaged foods that GIS and other companies rely on revenue for. According to a recent Gallup poll, 11% of U.S. adults already take GLP-1s. Meanwhile, with cheaper GLP-1 prices on the horizon, millions more Americans are likely to get on them.
Stagnant Sales Amid Strained Consumer
General Mills relies on low-end consumers for the bulk of its sales. Management expects category growth in fiscal 2027 to be consistent with fiscal 2026 and below long-term trends, reflecting ongoing household budget pressure.
Zacks Consensus Analyst Estimates project that GIS will see negative EPS growth until 2028, at which point they expect a feebly 4.73% EPS growth.
Image Source: Zacks Investment Research
Consumer Behavior and Trends
With lingering inflation pressures, the company’s client base has been moving away from higher priced consumer branded packaged foods and instead opting for private label or store branded alternatives. As a result, GIS has been offering discounts and promotions to try to increase volumes. However, these discounts have led to shrinking profit margins.
Image Source: Zacks Investment Research
Relative Price Weakness
GIS has exhibited consistent relative price weakness. Over the past year GIS shares are -25.7% while the S&P 500 Index is up 23.8%. In other words, the stock is an extreme laggard within a downtrend.
Image Source: Zacks Investment Research
Bottom Line
Faced with the dual pressures of shifting consumer habits and emerging health trends, General Mills finds itself in a challenging market position.
View the Zacks #1 Rank List
Bear of the Day: General Mills (GIS)
Key Takeaways
General Mills Company Overview
Zacks Rank #5 (Strong Sell) stock General Mills, Inc ((GIS - Free Report) ) is a global manufacturer and marketer of branded consumer foods sold primarily through retail stores. The company also operates a commercial food service segment. GIS’s primary product categories include ready-to-eat cereals, convenient meals, snacks, premium ice creams, baking mixes, and ingredients. Its products are sold across grocery, club, e-commerce, and other formats in the United States as well as in select international markets. Additionally, General Mills entered the pet food market with its acquisition of Blue Buffalo in2018 and Tyson Foods’ pet treats business in 2021.
The GLP-1 Headwind
GLP-1 weight loss drugs from Eli Lilly ((LLY - Free Report) ) and Novo Nordisk ((NVO - Free Report) ). GLP-1 drugs have proven to have massive positive effects on diabetes, weight loss, and heart disease. Unfortunately for General Mills, GLP-1s quell the users’ appetites, making them less likely to indulge in the packaged foods that GIS and other companies rely on revenue for. According to a recent Gallup poll, 11% of U.S. adults already take GLP-1s. Meanwhile, with cheaper GLP-1 prices on the horizon, millions more Americans are likely to get on them.
Stagnant Sales Amid Strained Consumer
General Mills relies on low-end consumers for the bulk of its sales. Management expects category growth in fiscal 2027 to be consistent with fiscal 2026 and below long-term trends, reflecting ongoing household budget pressure.
Zacks Consensus Analyst Estimates project that GIS will see negative EPS growth until 2028, at which point they expect a feebly 4.73% EPS growth.
Image Source: Zacks Investment Research
Consumer Behavior and Trends
With lingering inflation pressures, the company’s client base has been moving away from higher priced consumer branded packaged foods and instead opting for private label or store branded alternatives. As a result, GIS has been offering discounts and promotions to try to increase volumes. However, these discounts have led to shrinking profit margins.
Image Source: Zacks Investment Research
Relative Price Weakness
GIS has exhibited consistent relative price weakness. Over the past year GIS shares are -25.7% while the S&P 500 Index is up 23.8%. In other words, the stock is an extreme laggard within a downtrend.
Image Source: Zacks Investment Research
Bottom Line
Faced with the dual pressures of shifting consumer habits and emerging health trends, General Mills finds itself in a challenging market position.