3 Consumer Staples Stocks For Investors Watching Grocery Spending Trends

Cooling headline inflation at 2.8%, cheaper gasoline and still firm grocery prices at 3.9% put food retailers in a spotlight where everyday essentials matter more to household budgets. With travel and leisure costs climbing, many consumers may continue to prioritize supermarket spending over discretionary treats. That makes Consumer Staples stocks a potentially useful area for investors who are assessing how resilient earnings and cash flows might be as the Bank of Canada slows its rate hike pace. This article walks through 3 grocery and food retail stocks exposed to these trends, providing information to help you decide whether they suit your watchlist.

High Liner Foods (TSX:HLF)

Overview: High Liner Foods is a North American frozen seafood company that supplies prepared and packaged products, from basic fillets and shellfish to value added, breaded and ready to heat meals, to retailers, foodservice clients and consumers. Its portfolio spans multiple brands across grocery, club stores, restaurants and institutional customers.

Operations: High Liner Foods generates all of its approximately $1.1b in revenue from manufacturing and marketing prepared and packaged frozen seafood, with about $252.9 million from Canada and $840.4 million from the United States.

Market Cap: CA$411.3 million

High Liner Foods sits at the intersection of resilient grocery demand and consumers trading into at home meals, with frozen seafood and value added products that fit into tighter household budgets. Analysts describe the company as relatively inexpensive on P/E compared with peers, while market data points to a high dividend yield around 4.75%, which could appeal to income focused investors despite weaker free cash flow cover. At the same time, margins, Return on Equity and interest cover have come under pressure, and recent results show revenue up but earnings down. With inflation cooling and food remaining a core spend, the tension between value, debt load and profitability may make High Liner Foods a stock that some investors consider examining more closely.

High Liner Foods looks like a classic value and income story, with a higher dividend yield and lower P/E that many investors may be only half reading. The real twist sits inside the 3 key rewards and 3 important warning signs (1 is major!)

Inghams Group (ASX:ING)

Overview: Inghams Group is a major poultry producer in Australia and New Zealand, supplying fresh and processed chicken and turkey products under the Ingham’s brand to supermarkets, quick service restaurants and foodservice customers, and also selling stockfeed to the poultry and pig industries.

Operations: Inghams generates about A$3.2b in revenue from the feed and poultry industry, with roughly A$2.7b from Australia and A$496.3 million from New Zealand.

Market Cap: A$821.4 million

Inghams Group provides direct exposure to everyday grocery protein spending at a time when food prices are still rising faster than overall inflation. The company is working through higher wage, utility and input costs that have already reduced net margins from 2.8% to 1.8%. Analysts see scope for earnings growth relative to the wider Australian market, supported by automation projects, a greater focus on value added products and new leadership, including an incoming CFO with capital markets experience. Recent commentary has also highlighted some moderation in cost inflation and the possibility of feed cost relief over time. On the other hand, the company carries meaningful leverage and faces pressure from powerful supermarket customers. These factors mean the current valuation and earnings outlook may warrant closer analysis when considering how Inghams might fit into a Consumer Staples portfolio.

Inghams Group’s squeezed margins and cost pressures may be hiding a more interesting earnings story as automation and value added products ramp up, so it is worth reviewing the analyst forecasts for Inghams Group to see what the market might be missing

Select Harvests (ASX:SHV)

Overview: Select Harvests is a major Australian almond grower and processor that runs an end to end business from orchards through to packaged almond products, supplying blanched, roasted, sliced, diced, meal and paste formats to food manufacturers and retailers across Australia, Asia, Europe and the Middle East.

Operations: Select Harvests generates A$352.8 million in revenue from almond products, all currently reported from Australia.

Market Cap: A$577.2 million

Select Harvests provides focused exposure to the almond aisle at a time when grocery budgets still favour staple, health focused foods. Analysts expect both earnings and revenue to grow at mid teens and high single digit rates respectively. The integrated model and efficiency projects such as kernel recovery and processing upgrades, together with an apparent discount to estimated fair value, sit on one side of the ledger. Weather risk, input cost pressures and reliance on external debt sit on the other. Recent buyback approvals, ongoing dividends and the addition of an experienced consumer sector director indicate management confidence, but the key question is how all of these moving parts translate into future cash flows and valuation.

Select Harvests looks like a classic almond growth story with a twist, where efficiency projects and an integrated model could be only half the picture. The analyst forecasts for Select Harvests may reveal how weather, debt and pricing power really intersect.

The three stocks highlighted here are only a starting point, with the full Consumer Staples (Grocery and Food Retailers) screener surfacing 22 more companies that share equally compelling everyday essentials and grocery focused narratives. Use Simply Wall St to identify and analyze the specific catalysts, earnings quality markers and balance sheet traits discussed here so you can narrow in on the Consumer Staples stocks that best match your highest conviction ideas.

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Seeking Fresh Alternatives Beyond Grocers?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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