Conagra profit dips 18%, beating analyst expectations
- Conagra Brands, maker of Chef Boyardee pasta and Reddi-Wip whipped cream, reported that its first quarter profit fell 18% to $152.5 million compared to a year ago as it invested in slotting brands like P.F. Chang's and PAM at more grocery stores, according to a company release. These results exceeded market expectations, and were buoyed by higher margins after the manufacturer limited discounts.
- Net sales fell 4.8% to $1.80 billion as a result of weak demand for Conagra's grocery and snack products, but edged out analyst expectations of $1.79 billion. The company reaffirmed its forecast for fiscal 2018.
- Sales fell in the grocery and snacks segment by 2% to $746 million, somewhat steadied by the recent acquisitions of Duke's, BIGS, and Frontera, which added more than 3% to the growth rate. Refrigerated and frozen sales jumped 2% to $616 million, and organic sales rose 1%.
Conagra, the third-largest frozen foods manufacturer in North America, has been looking to improve its margins internally for some time. To strengthen profits, the food manufacturer has raised prices on popular products like Banquet frozen meals, which previously retailed at $1.
The company has also invested in product innovations under the Healthy Choice brand in order to lure millennial consumers. Conagra has added a protein-rich "Power Bowl" made with ethnic spices as a complement to Banquet recipes like Chicken Pot Pie, Meat Loaf and Salisbury Steak — heartier meals that typically appeal to older consumers.
Conagra's frozen food brands, including Marie Callender's, Healthy Choice and P.F. Chang's, make up a $2.9-billion business for the company. President and CEO Sean Connolly hopes to boost interest in these brands by continuing to roll out product variations that reflect consumer trends. "What I love about our frozen portfolio is we have highly differentiated brads that compete to very different need states within the frozen space," he told Food Business News earlier this month.
With its increase, frozen was a relatively bright spot for Conagra, but slowing grocery and snack segment sales don't inspire much confidence. It's possible that the company's staple brands just aren't in sync with evolving consumer demands, which are trending toward clean label, all-natural food and beverage solutions. Still, it will be interesting to see if recent acquisitions like Duke's, a premium, hormone-free meat snack maker, and Frontera Foods, a trendy Mexican food brand, will begin to buoy the company going forward.
Both protein and authentic ethnic flavors are top of mind for today's consumer. With the right marketing push and creative product innovation, these on-trend brands could help breathe new life into Conagra's often stagnant grocery and snack business. The company has already started to expand its Frontera business, adding skillet meals and single-serving bowls to its product portfolio — much like the single-serving meals that brought Banquet success. A specific focus on snacks could also yield better performance — 94% of consumers say they had at least one snack yesterday, though most had four to five, according to a study from Datassential.
"Our sales trend improved as a result of accelerating velocities on our existing business as well as a strong start to our innovation," Sean Connolly, president and CEO of Conagra Brands, said in the company release. "Overall, we remain encouraged that our value over volume strategy, as well as our rebuilt innovation capabilities, continued to deliver as expected."
Barclays analyst Andrew Lazar wrote in a note Thursday that he sees these quarterly results as a relief for investors, especially given the positive organic sales growth in the refrigerated and frozen segment.
- Reuters UPDATE 1-ConAgra tops profit estimates after limiting discounts
- Nasdaq Conagra Brands Backs FY18 View As Q1 Earnings Beat View; Plans $1.1 Bln Buyback
- Zacks Conagra Brands (CAG) Beats on Q1 FY 2018 Earnings & Revenues September 28, 2017
- Market Watch Conagra beats sales estimates, sticks with full-year guidance
- PR Newswire Conagra Brands Reports Strong First Quarter
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