Conagra Brands reports declining sales, earnings in third quarter of fiscal year 2025
Net sales have fallen 6.3% as supply constraints and inflation weigh on performance. Adjusted EPS is also down 26.1%, but the company has maintained full-year outlook.
USA – Conagra Brands, Inc. (NYSE: CAG) is reporting a drop in sales and earnings for the third quarter of fiscal year 2025, which ended on February 23, reflecting ongoing operational challenges and market headwinds.
The company’s net sales declined by 6.3% to US$2.8 billion, largely due to a 5.2% decrease in organic net sales, along with minor negative impacts from currency fluctuations and mergers and acquisitions.
Organic net sales were affected by a 2.1% drop in pricing and mix, and a 3.1% decline in volume, both driven by strategic investments in the retail segment and adjustments related to previous trade expense estimates.
Gross profit fell by 17.3% to US$710 million, while adjusted gross profit dropped by 19.1% to US$704 million, mainly due to inflationary pressures on input costs and reduced sales volume.
As a result, the gross margin contracted by 331 basis points to 25.0%, and the adjusted gross margin decreased by 389 basis points to 24.8% over the period.
Operating margins also suffered, with the reported figure falling to 8.4%, a 712 basis point drop, and the adjusted margin declining by 369 basis points to 12.7%.
Net income attributable to the company decreased by 53% to US$145 million (US$0.30 per share), while adjusted net income dropped by 26.3% to US$242 million (US$0.51 per share).
The company cited reduced shipment volumes, partially linked to previously announced supply issues in the frozen meals and vegetable categories, as a key factor behind the decline.
Segment Performance
Sales in the Refrigerated & Frozen segment fell 7.2% to US$1.1 billion, with a 4.2% decline in price/mix and a 3.0% drop in volume, largely influenced by increased promotional activity and supply limitations.
Although volume share was gained in categories such as frozen desserts, breakfast items, and hot dogs, operating profit in the segment declined sharply by 52.5% to US$96 million due in part to impairment charges.
Adjusted operating profit for the segment was US$124 million, down 38.8%, as lower SG&A expenses and productivity gains were offset by weaker sales and cost inflation.
Across the business, adjusted EBITDA decreased by 18.9% to US$514 million, with reduced gross profit acting as the main contributor.
Despite the quarterly declines, Conagra has maintained its full-year guidance, projecting organic net sales to decline by around 2%, an adjusted operating margin of 14.4%, and adjusted EPS of about US$2.35.
Free cash flow conversion is expected to remain above 100%, according to the company’s projections.
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