Will The Ozempic Process Bite Food Stocks?
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Originally developed to treat type II diabetes, drugs such as Ozempic, Mounjaro and Wegovy have gained traction for their weight-loss capabilities. Ozempic, manufactured by Novo Nordisk, is the most popular weight loss product on the market, as its stellar reputation has led to a huge shortage.
Ozempic’s massive popularity has had a profound effect on consumer behavior, especially in the grocery industry. As more and more people turn to these drugs to control their weight, suppress appetite and alter taste preferences, the negative effects are being felt in grocery stores across the country.
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According to a study published by the analytics firm Grocery Doppio, Ozempic people buy 47% less baked goods, 13% less processed food and 28% less calorie-dense drinks. The study also revealed that 97% of consumers who use weight loss pills have reduced their grocery consumption by about 11%.
This, along with persistent inflationary challenges, has affected the profit margins of grocers.
Hook
Kroger Co. (NYSE: KR), one of the largest grocery chains in the United States, is particularly vulnerable to volatility.
The company has been relying on online items such as snacks, baked goods, and processed foods — precisely the categories that see the highest price drops among diet pills. of the body.
Kroger’s total sales reached $45.3 billion in the first fiscal quarter (ending May 2024), marking a slight increase from the $45.2 billion reported in the same period last year. However, the company’s operating profit fell by nearly 12% year over year to $1.29 billion, while its adjusted EPS fell by more than 5% to $1.43.
Kroger is trying to streamline its operations to keep up with the changing market by expanding its range of healthy foods, including organic products and lean proteins, to cater to health-conscious consumers. . However, Wall Street experts expect Kroger to suffer in the near future, as the company’s bottom line is expected to drop 6.7% year over year to $4.44 in the current fiscal year.
Walmart
Walmart Inc. (NYSE:WMT), with a wide variety of products and brands, is uniquely positioned to weather the storm. Although the giant may see a decline in sales of sugary drinks, snacks and other affected areas, its wide selection of general merchandise and other products mitigates the loss significantly.
Walmart’s adjusted operating income rose 13.7% year over year to $7.1 billion in the first fiscal quarter, driven largely by member revenue growth. The company’s total revenue increased 6% from last year to $161.5 billion, while adjusted earnings reached $0.60 per share, marking an increase of 22.4% year-over-year.
Walmart’s growing emphasis on e-commerce services and grocery delivery has positioned it well to adapt to changing consumer behavior. The company’s global e-commerce sales rose 21% in the last reported quarter. Also, Walmart joined the Dividend King category earlier this year, having raised its dividend for 51 consecutive years.
Do Not Pass:
Kraft Heinz
The Kraft Heinz Company, a major player in the processed food industry, faces major challenges following the Ozempic approach. The company’s net sales fell 3.6% year over year to $6.48 billion in the second fiscal quarter of 2024.
Kraft Heinz’s profit margins were also impressive. Its net income fell by 90% year-over-year to $100 million, while operating income fell by more than 62% year-over-year to $522 million.
“Our second quarter sales growth was slower than previously expected, as consumer sentiment remains cautious,” said Carlos Abrams-Rivera, CEO of Kraft Heinz, in a news release.
The company pays $1.60 in dividends annually, yielding 4.54% at current prices. Kraft Heinz’s four-year dividend yield was 4.38 %. However, the grocer’s dividend yield has remained stagnant since the start of 2019.
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This article Will the Ozempic Process Bite Food Stocks? originally appeared on Benzinga.com
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