This frozen foods and snacks seller cut prices again but sales are still falling

By Tomi Kilgore

Conagra's stock falls after sales miss expectations as prices and volumes extend streaks of quarterly declines

Shares of Conagra Brands Inc. took a hit Thursday, after the parent of food brands including Healthy Choice, Boomchickapop, Duncan Hines and Birds Eye reported quarterly revenue that fell short of forecasts and provided a downbeat profit outlook.

The drop in sales was a result of continued declines in both prices and volume, as consumption trends remained weak.

The stock (CAG) fell 3.4% in morning trading, and was headed for the lowest close since March 7.

The company swung to a net loss for the fiscal fourth quarter to May 26 of $567.3 million, or $1.18 a share, from net income of $37.5 million, or 8 cents a share, in the same period a year ago.

Excluding nonrecurring items, such as goodwill and brand impairment charges, adjusted earnings per share of 61 cents beat the FactSet consensus of 57 cents.

Sales fell 2.3% to $2.906 billion, to mark the fourth straight quarterly decline and to miss the FactSet consensus of $2.931 billion, as grocery and snacks sales declined 2.1% and refrigerated and frozen sales decreased 3.8%.

Excluding the impact of foreign-currency moves, organic net sales were down 2.4%, as price and mix declined 0.6% and volume decreased 1.8%.

Price and mix have now fallen for a third straight quarter, and volume was down for a 13th straight quarter.

However, the volume decline in the latest quarter matched that of the previous quarter, which was the lowest rate of decline seen since the last increase in the fiscal third quarter of 2021. Volume had declined 2.9% in the fiscal second quarter and dropped 6.6% in the first quarter.

"We still have some work to do, but you can see how volumes recovered significantly in the second half of the year," Connolly said.

Within the grocery and snacks segment, volume fell 3.6%, hurt by a "inflation-driven" price and mix increase of 1.5%. For the refrigerated and frozen segment, price and mix dropped 4.7%, fueled by brand-building investments, to offset a 0.9% increase in volume.

Chief Executive Sean Connolly said he expects a "gradual waning of challenging industry trends" in the coming year, as consumers adapt and get used to current pricing.

"In light of this, we've prudently tempered our fiscal 2025 outlook," Connolly said.

The company expects fiscal 2025 adjusted EPS of between $2.60 and $2.65, below the current FactSet consensus of $2.70.

The stock has lost 2.9% year to date, while the Consumer Staples Select Sector SPDR ETF XLP has gained 6.9% and the S&P 500 has rallied 18.1%.

-Tomi Kilgore

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07-11-24 1125ET

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