Conagra tops earnings and sales estimates even as consumers get frugal

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Oct 6 (Reuters) – Conagra Brands Inc (CAG.N) beat quarterly sales and profit estimates on Thursday, boosted by higher prices for its Marie Callender’s and Slim Jim brands even as consumer demand falls below the weight of high inflation for decades.

Global food companies have raised prices over the past year to protect profit margins, which have been squeezed by high transport and labor costs and soaring raw material costs like corn, wheat, protein and edible oils.

However, signs that consumers are becoming more price-sensitive have started to appear and analysts have signaled that Americans are looking for more affordable alternatives as persistent inflation erodes consumer purchasing power.

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Conagra noted that store brands are gaining market share in some categories from 2019 levels, echoing sentiments from peers Campbell Soup Co (CPB.N) and JM Smucker Co (SJM.N).

Still, Conagra chief executive Sean Connolly announced further price increases in the third quarter, although he expects volumes to remain challenging in the second quarter.

“I think the operating environment for Conagra Brands as well as the whole packaged food industry is getting a little tougher and I say this…because every dollar of additional price increase will be harder to get,” CFRA analyst Arun Sundaram said.

“It’s just because the demand environment, while still very favorable, is not as strong as it was over the past couple of years,” Sundaram added.

Shares of Conagra, known for brands like Birds Eye and Chef Boyardee, fell about 2% as the company saw a 4.6% drop in sales volumes in the reported quarter, offset by higher average selling prices by 14.3%.

On an adjusted basis, the company earned 57 cents per share, beating estimates of 52 cents per share, according to IBES data from Refinitiv.

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Reporting by Granth Vanaik and Mehr Bedi in Bengaluru; Editing by Shounak Dasgupta and Maju Samuel

Our standards: The Thomson Reuters Trust Principles.

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