Conagra Brands adjusts annual targets amidst weak consumer demand

USA – Conagra Brands, the US food company renowned for Slim Jim meat jerky and Hunt’s ketchup, adjusted its projections for essential sales and profit metrics on January 4, attributing the changes to slow consumer demand.

The company now expects its annual net sales to decline by 1-2% on an organic basis, a shift from its previous projection of a 1% growth.

The adjusted operating margin forecast has been lowered to approximately 15.6%, compared to the October estimate of 16-16.5%.

Furthermore, Conagra has revised its annual adjusted earnings per share to a range of US$2.60 to US$2.65, down from the initial projection of US$2.70 to US$2.75.

The company attributed these adjustments to a slower-than-expected recovery in volumes and has outlined plans to increase investments in its brands.

This strategic move cames as part of Conagra’s commitment to fortify its market position despite challenging market conditions.

The company’s fiscal second-quarter financial results, published alongside the revised forecasts, indicated a 3.2% decline in net sales to US$3.21 billion, with organic net sales down 3.4%.

Volumes also saw a decrease of 2.9% during this period. Gross profit dropped by 8.2% to $847 million, influenced by factors such as cost of goods sold inflation, lower organic net sales, and unfavorable operating leverage.

Conagra reported a decrease in gross margin by 145 basis points to 26.4%, and adjusted gross margin decreased by 129 basis points to 26.9%.

Selling, general, and administrative expenses (SG&A) increased by 6.8% to $398 million, driven by business reclassification to held for sale and legal reserve adjustments.

Adjusted SG&A, excluding advertising and promotional expense, decreased by 4.1% to $279 million.

Despite challenges, Conagra President and CEO Sean Connolly noted positive signs in Q2, citing substantial improvements in volume trends in the domestic retail business.

Connolly expressed confidence in targeted investments, particularly in the frozen business, expecting momentum building in the second half and setting the stage for a robust fiscal year 2025.

In addition, the company acknowledged the impact of changing buying trends and pressures on consumer spending but remains focused on adapting to market dynamics and reinforcing its strategic initiatives for future growth.

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