Conagra retains annual forecasts, takes $968 million charge in Q2 amid muted demand

By Neil J Kanatt and Jessica DiNapoli

Dec 19 (Reuters) – Conagra Brands on Friday kept its annual sales and profit targets intact after a muted second-quarter as the Slim Jim meat snacks maker tackles uneven demand for its pantry staples due to pressured consumer spending and stiff competition.

The Hunt’s ketchup maker also swung to a quarterly loss as it incurred a $968 million non-cash impairment charge following a sustained decline in its share price.

Conagra has lost about 36% of its market value this year after battling supply chain issues, higher ingredient costs, and lackluster demand, with budget-conscious shoppers trading down. Shares were down about 2% on Friday.

Consumers’ shifting preference for healthier options amid the “Make America Healthy Again” movement, and increased adoption of GLP-1 or weight-loss drugs pose further risks to packaged food demand.

Conagra’s shares appear inexpensive as sentiment across the sector remains muted, RBC Capital Markets analyst Nik Modi said.

“Shares will be tied to evidence of a sustained volume recovery.”

Quarterly volumes fell 3%, after rising 0.4% a year ago. Net sales fell 6.8% to $2.98 billion, in line with expectations. 

“Household budgets continued to be strained, and value-seeking behavior persisted, with these pressures weighingmost heavily on low and middle-income consumers,” CEO Sean Connolly said.

Conagra reported a net loss of $663.6 million for the quarter, compared with a profit of $284.5 million a year ago.

On an adjusted basis, the company posted earnings per share of 45 cents, beating estimates by 1 cent.

The company is not looking to make acquisitions and is instead focused on maximizing its cash flow and paying down debt, Connolly told Reuters. 

The Hungry-Man frozen dinner maker is open to targeted divestitures, Connolly added. The company sold the Chef Boyardee brand this year. 

The packaged food sector has seen several high-profile deals this year, including Kraft Heinz’s planned split and European confectioner Ferrero’s acquisition of WK Kellogg. 

Conagra reiterated its annual forecasts for the second time this year, expecting net sales between a 1% decline and a 1% rise, and adjusted profit per share between $1.70 and $1.85.

Peers General Mills and Campbell’s have also maintained their annual forecasts recently amid the economic uncertainty.

(Reporting by Neil J Kanatt in Bengaluru and Jessica DiNapoli in New York; Editing by Leroy Leo)