B&G Foods, Inc. BGS has experienced a significant decline in its stock performance. Over the past three months, the stock has slumped 22.9%, underperforming the industry’s decline of 7.2%. This shelf-stable and frozen foods company has also lagged the Zacks Consumer Staples sector’s drop of 5.6% and the S&P500's growth of 11.5% in the same time frame.
B&G Foods has been grappling with a volatile consumer landscape, which has been denting revenues, especially in its Foodservice segment. High input costs and currency movements are added concerns.
BGS 3-Month Price Performance vs. Industry, Sector & S&P 500
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Technical indicators are also not supportive of BGS’ performance. The company is trading below its 50 and 200-day moving averages, indicating potential weakness in the stock's momentum.
Challenges Hindering BGS’ Momentum
Like many other food companies, such as General Mills GIS and Conagra Brands CAG, B&G Foods is encountering a dynamic consumer landscape. The company’s Foodservice sales, accounting for 15% of total revenues, declined by 2-3% in the third quarter of 2024, reflecting ongoing challenges in the restaurant industry. Broader macroeconomic headwinds, such as food inflation and shifts in consumer spending patterns, continue to suppress demand in both retail and foodservice channels. These structural challenges may delay a full recovery, putting downward pressure on revenues and margins.
Due to these industry-wide headwinds, B&G Foods has been witnessing soft sales for the past few quarters. The trend continued in the third quarter of fiscal 2024, wherein the top and bottom lines declined year over year. Sales were impacted by the divestiture of the Green Giant U.S. shelf-stable product line (concluded in Nov. 2023), lower unit volumes and consumer purchasing patterns influenced by high food inflation. The company’s adjusted earnings of 13 cents per share slumped 52%. Net sales of $461.1 million declined 8.3% year over year. Base business net sales fell 4.4% to $461.1 million due to lower unit volumes and currency headwinds.
B&G Foods has been encountering cost-related pressures. In the third quarter of 2024, adjusted EBITDA was $70.4 million, down from $80.4 million in the prior year, and the EBITDA margin contracted to 15.3% from 16% in the same period last year. While some deflationary tailwinds were noted in soybean oil and logistics costs, inflation persisted in key inputs such as black pepper, garlic and olive oil, straining gross margins. Sustained cost pressures without adequate pricing power may weigh on future earnings potential.
What to Expect From B&G Foods in 2024?
B&G Foods revised its 2024 outlook downward on its third-quarter earnings call, indicating a slower-than-expected recovery in center store trends and the broader consumer environment. The company anticipates a slow recovery and stabilization only in fiscal 2025, with sequential improvement expected between the first and second halves of the year.
For fiscal 2024, management anticipates net sales in the band of $1.920-$1.950 billion compared with the earlier view of $1.945-$1.970 billion. In fiscal 2023, net sales amounted to $2,062.3 million ($2.06 billion). The company anticipates adjusted EBITDA in the range of around $295-$305 million compared with $300-$315 million projected earlier. BGS recorded an adjusted EBITDA of $318 million in fiscal 2023. Adjusted earnings per share (EPS) for fiscal 2024 are envisioned between 67 and 77 cents, lower than the earlier guided range of 70-90 cents. In fiscal 2023, the company posted an adjusted EPS of 99 cents.
B&G Foods Looks Well-Positioned for the Long Term
B&G Foods has been emphasizing innovation across several key categories to drive growth. The introduction of premium sides and Ramen-based products under the Green Giant brand (scheduled for this fall and next spring) aligns with evolving consumer preferences for convenient, value-added food products. Ortega, a leader in the taco sauce category, has a robust pipeline of channel innovations supported by increased marketing investments. This strategic focus on innovation ensures the company remains competitive while tapping into growth opportunities within its high-potential segments.
The company has a successful track record of acquisition-led growth as it has integrated more than 50 brands into its portfolio since its establishment in 1996. The company acquired the Crisco brand from J.M. Smucker SJM in December 2020. Before this, the company acquired Farmwise (in February 2020) and an integrated retail baking powder maker, Clabber Girl (acquired in May 2019). The company has acquired notable brands such as Victoria, Mama Mary, TrueNorth, McCann’s and Ortega.
B&G Foods’ strategic divestiture of non-core assets is another positive step toward focusing on its core strengths. In November 2023, the company sold its Green Giant U.S. shelf-stable product line to Seneca Foods Corporation. Prior to this, B&G Foods sold the Back to Nature brand in January 2023 in a bid to exit the small, fragmented, lower-margin snacks portfolio. B&G Foods remains focused on speeding up the restructuring of its portfolio to optimize future value generation. The company’s continued focus on reshaping its portfolio positions it to concentrate on higher-margin, core segments like Spices & Flavor Solutions and Meals.
B&G Foods’ Spices & Flavor Solutions unit continues to be a standout performer, which offered some respite to the company’s third-quarter 2024 sales decline in all other units. The company reported a 2.6% year-over-year increase in net sales for its Spices and Flavor Solutions segment in the third quarter, demonstrating its ability to capture consumer demand in an otherwise challenging environment. This growth was bolstered by an increased preference for fresh produce and proteins, aligning with health-conscious dietary trends. With Spices and Flavor Solutions being its highest-margin segment, continued momentum here supports both revenue growth and profitability in the long term.
Navigating BGS Stock: A Guide for Investors
B&G Foods faces near-term headwinds, including declining revenues, cost inflation and a challenging consumer landscape, which have negatively impacted its financial performance and stock momentum. However, B&G Foods remains committed to strengthening its long-term positioning through portfolio optimization, innovation and a focus on higher-margin segments such as Spices & Flavor Solutions. Strategic divestitures and targeted investments in new product categories demonstrate its proactive approach to addressing evolving market dynamics.
While caution is warranted given the current environment, B&G Foods' initiatives position it for gradual improvement and sustained profitability over the long term. For now, maintaining positions in B&G Foods appears prudent. The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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