Conagra trims profit forecast as higher inflation, promotions to dent margins

By Savyata Mishra

(Reuters) -Conagra Brands on Thursday joined rival General Mills (NYSE:GIS ) in trimming its annual profit forecast and warning that price cuts on its products across grocery, snacks and frozen food items to spark demand will weigh on margins.

Consumers, wary of higher grocery prices, have turned to cheaper private label brands, hurting sales at packaged food companies including Conagra, Campbell's Co, Kraft Heinz (NASDAQ:KHC ) and JM Smucker (NYSE:SJM ).

In response, these companies have ramped up promotions on their branded food products this year, introducing smaller pack sizes and increasing advertising to entice shoppers.

Conagra, which typically caters to more budget-strapped customers, said volumes improved in the snacking and staples categories such as microwave popcorn, and frozen vegetables on the back of promotions, thought it remains cautious on deep discounting.

"We're still seeing value-seeking behaviors, with consumers prioritizing affordability and maximizing value," CEO Sean Connolly said in prepared remarks.

Conagra expects rising cocoa and sugar prices to pressure its margin and said a stronger dollar would hurt its international segment sales in the back half of the year.

"Company's updated view better reflects the consumer environment but the pivot to ramp merchandising takes a toll on margins," RBC analyst Nik Modi said.

Conagra now expects fiscal year 2025 adjusted profit per share in the range of $2.45 to $2.50, compared with its prior target of between $2.60 and $2.65.

It also lowered its adjusted operating margin forecast to about 14.8%, from a range of 15.6% to 15.8%.

Shares of the Slim Jim beef jerky maker were down 2% in early trade, after having declined about 4% this year.



The company posted a smaller-than-expected drop in second-quarter sales as price cuts across its categories helped prop up demand that has slowed over the last few years.

Net sales came in at $3.20 billion for the three months ended Nov. 24, compared with analysts' average estimate of $3.15 billion, according to data compiled by LSEG.

Source: Investing.com