Conagra forecasts dour profit as higher prices curb demand

10:07 am Thursday, July 13th, 2023

By Aatrayee Chatterjee and Mehr Bedi

(Reuters) -Conagra Brands Inc on Thursday forecast annual sales and profit below Wall Street estimates, in a sign that the packaged food giant was starting to face some pushback to higher prices from inflation-weary customers.

Persistent inflation has eroded budgets at many American households and forced consumers to trade down from branded packaged food products to cheaper private-label alternatives, hurting companies that have been steadily raising product prices over the past few years to counter spiraling costs.

Analysts view Conagra’s annual organic sales growth outlook as disappointing. Barclays analyst Andrew Lazar said, “wonder if this (forecast) could mean negative organic sales at some point in FY24… as the benefit from pricing wanes.”

The company’s conservative forecast was in contrast to peers Mondelez International Inc and Kellogg Co, which have lifted their annual forecasts on the back of higher prices and steady demand.

Meanwhile, packaged food maker General Mills has forecast annual profit largely below analysts’ estimates, signaling inflation-induced slowing consumer demand.

Shares of Conagra, known for its Act II Microwave Popcorn and Chef Boyardee brands, were marginally down.

Revenue in the fourth quarter ended May fell short of expectations, hurt by a 1.1% fall in the company’s refrigerated & frozen segment after a cybersecurity incident at a key cold storage partner Americold Realty Trust caused disruptions to parts of its operations.

Net sales in the quarter rose 2.2% to $2.97 billion, below analysts’ average estimate of $2.99 billion estimate, according to Refinitiv IBES estimates

Still, Chicago-based Conagra raised its quarterly dividend to 35 cents a share from 33 cents.

It forecast fiscal 2024 adjusted EPS between $2.70 and $2.75, compared with analysts’ average estimate of $2.85 per share.

Full-year organic net sales growth is expected to be 1% higher than 2023, while analysts on average were expecting an increase of 2.77%.

(Reporting by Mehr Bedi and Aatrayee Chatterjee in Bengaluru; Editing by Shinjini Ganguli)