(Reuters) -Conagra Brands beat Wall Street estimates for first-quarter sales and profit on Wednesday, as the U.S. packaged food maker benefited from stronger-than-anticipated demand for its pantry staples such as Slim Jim meat snacks and Act II popcorn. Shares were up about 3% after the company also maintained its annual forecasts, betting on the trend […]
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Conagra Brands beats quarterly estimates on robust packaged food demand
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(Reuters) -Conagra Brands beat Wall Street estimates for first-quarter sales and profit on Wednesday, as the U.S. packaged food maker benefited from stronger-than-anticipated demand for its pantry staples such as Slim Jim meat snacks and Act II popcorn.
Shares were up about 3% after the company also maintained its annual forecasts, betting on the trend of consumers opting to cook at home due to higher living costs. Organic net sales fell 0.6%, while volumes declined 1.2%.
The results, which analysts said were “better than feared,” come as tariff-induced higher prices and macroeconomic uncertainty pose a threat to demand, along with competition from cheaper private-label brands.
“We continue to navigate a challenging environment as we’re still dealing with persistent inflation and tariffs, both of which have drifted higher than our original expectations,” CEO Sean Connolly said in a statement.
“Against that backdrop, consumer sentiment remains weak and we still see value-seeking behavior.”
Conagra expects an overall rise in the “low-7% range” for cost of goods sold, including a 3% hit from tariffs, compared with its prior forecast of about a 7% overall increase.
Conagra’s canned food such as Hunt’s tomatoes have been hit by tariffs on tin-plate steel. Cocoa, an important ingredient for the company’s Duncan Hines baking products, faces inflation due to both supply shortages and tariffs.
The company expects to mitigate some impact through cost-saving initiatives, sourcing alternatives and pricing actions, among others.
Connolly said in an interview the company has been very careful with how it is increasing prices, holding back in frozen meals, for example, where it is trying to grow volumes.
“But in our staples business which includes our canned food business, we’ve experienced significant cost run-up due to tariffs on tin-plate steel,” Connolly said. “We will be taking price to offset that in the back half of our fiscal year.”
Connolly said consumers usually adjust to new, higher price points within a year, and “purchases go back to normal.”
The company also warned that tariff-driven pricier inventory would weigh on the current quarter’s operating margins. Gross margin fell 212 basis points to 24.3% in the first quarter.
Conagra’s quarterly revenue fell 5.8% to $2.63 billion for the quarter ended August 24, beating analysts’ average estimate of $2.62 billion, according to data compiled by LSEG.
Its quarterly adjusted earnings of 39 cents per share exceeded expectations of 33 cents.
(Reporting by Anshi Sancheti and Neil J Kanatt in Bengaluru and Jessica DiNapoli in New York; Editing by Shreya Biswas, Sriraj Kalluvila and Chris Reese)