How Kraft's Mac and Cheese Recall Will Affect Its Stock Price
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Busy parents aren't the only ones concerned about Kraft's recall of about 242,000 cases of Macaroni & Cheese Dinner because some boxes may contain shards of metal.
Investors may fear the mistake, which has not caused any reported injuries to date, could take a toll on Kraft's stock. The share price has dropped about 2% since the announcement, but the big question is whether any damage will be lasting.
Based on history, that's fairly unlikely.
Less than four years ago, Kraft faced a similar recall of about 137,000 cases of its Velveeta Shells & Cheese single-serve cups because a few were discovered to contain wire bristle pieces. The stock (Kraft back then was part of a larger company that has since been renamed Mondelez International) dipped for just a couple of days and then bounced back within weeks.
Further back in February 2007, Kraft had to recall Oscar Mayer chicken strips believed to be contaminated with Listeria, leading to nearly 3 million pounds of meat being pulled from shelves. That big recall hurt the stock for longer, but shares came back to previous prices by summertime.
Other companies have also experienced fairly quick stock price recoveries after product recalls. In 2006, a recall of more than 4 million Dell notebook batteries due to fire risk caused the tech company's stock to dip, though it rebounded after just a few months.
In general, it's unlikely for product recalls to have a long-term effect on company stock prices (or sales, for that matter).
Then again, there are always exceptions. After Hasbro had to recall a million Easy-Bake Ovens in 2007, following serious safety problems causing burns and other injuries, the share price sank progressively over the course of months—taking about a year to fully recover.