Conagra forecasts profit below estimates as demand wavers, costs soar

ConAgra Meals manufacturing facility is seen in Oakdale, California, in December 18, 2015. REUTERS/Fred Greaves

July 14 (Reuters) – Conagra Manufacturers Inc (CAG.N), the maker of Hunt’s canned tomatoes, forecast annual earnings beneath Wall Road expectations on Thursday, as inflation-induced worth hikes dent demand for its frozen meals and snacks whereas mounting prices crimp margins.

Shares of Conagra fell about 9% as the corporate additionally reported a 6.4% drop in fourth-quarter gross sales volumes with customers exhibiting indicators of pushing again towards worth will increase.

Lingering supply-chain points and skyrocketing freight and ingredient prices have compelled Conagra to boost costs at a time when decades-high inflation pinches spending by American households, consuming in to the corporate’s revenue margins.

“We have got to take inflation-justified pricing to get well our margins,” Chief Govt Officer Sean Connolly mentioned on a name with analysts.

The more-than-a-century-old firm, nonetheless, mentioned it expects gross sales volumes to take a much bigger hit in fiscal 2023 as a consequence of continued worth hikes.

Conagra now expects full-year adjusted revenue per share to develop by 1% to five% in contrast with expectations of an 8.3% progress, with gross inflation projected to be within the low-teen share vary for the yr.

Connolly mentioned in an interview with Reuters that spreads and sizzling canine are classes the place customers are extra delicate to cost hikes. Conagra sells Earth Steadiness buttery spreads and Hebrew Nationwide sizzling canine.

On Wednesday, U.S. client costs within the 12 months by way of June jumped 9.1%, their largest achieve since November 1981, cementing the case for a supersized fee hike by the Federal Reserve. learn extra

“There shall be some pushback amongst retailers and pushback among the many customers … Going ahead, it may be a bit of bit tougher for packaged meals firms to extend costs,” CFRA analyst Arun Sundaram mentioned.

Connolly mentioned talks with retailers “stay constructive.” He mentioned Conagra has to guard its margins by elevating costs to proceed delivering new and improved merchandise to the retailers it provides. These retailers, together with Kroger Co and Walmart Inc (WMT.N), prioritize the gross sales progress new merchandise assist ship, he mentioned.

Internet gross sales rose by a smaller-than-expected 6.2% to $2.91 billion within the quarter, whereas adjusted revenue of 65 cents per share beat expectations by 2 cents.

Reporting by Mehr Bedi and Deborah Sophia in Bengaluru
Extra reporting by Jessica DiNapoli in New York
Enhancing by Vinay Dwivedi and Matthew Lewis

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