Conagra Brands beat Wall Street estimates for first-quarter profit, as higher prices and easing cost pressures offset slowing demand for the Slim Jim beef jerky maker's ready-to-eat meals, frozen foods and snacks.
Conagra, which grappled for months with higher costs tied to labour and raw materials, raised prices of its products multiple times over the last several quarters, and is now seeing some of the expenses ease from their peaks.
Even as price hikes helped gross margins climb 354 basis points to 28.3% in the first quarter, the company's volumes were affected as customers adopted a more cautious stance over spending on expensive branded food items.
Shares of the Chicago-based packaged food maker fell 1.4% to $26.15 premarket as Conagra missed quarterly sales estimates and also maintained tepid targets for annual sales and profit. As of last close, stock dropped 31% so far this year.
Conagra still expects its annual organic net sales growth to be 1% and adjusted EPS to come in between $2.70 and $2.75.
Quarterly Highlights
In the reported period, the Act II microwave popcorn owner saw sales volumes drop 6.6%, while average selling prices rose by 6.3%.
Excluding one-time items, it earned 66 cents per share, above estimates of 60 cents.
Peer General Mills in September also narrowly topped profit estimates on higher prices, but the Cheerios cereal maker's volumes took a hit as consumers turned cautious.
Campbell Soup forecast an upbeat annual profit as the company bets on easing cost pressures.
Conagra reported first-quarter net sales of $2.90 billion, while analysts on average expected $2.95 billion, according to LSEG data.
Sean Connolly, president and chief executive officer of Conagra Brands, commented, "We will continue to focus on executing our Conagra Way playbook as we make targeted and disciplined investments throughout the remainder of the year to drive the top-line.
"We are reaffirming our guidance for fiscal 2024, reflecting confidence in our plans, people and agility as we continue to navigate a shifting consumer environment."
News by Reuters, additional reporting by ESM.
