Conagra Beats Profit Estimates Despite Slowing Demand

Conagra Brands, the renowned maker of Slim Jim beef jerky, has exceeded Wall Street expectations for its first-quarter profit. The company’s ability to offset slowing demand with higher prices and reduced cost pressures contributed to this positive outcome. Despite facing challenges from elevated labor and raw materials costs, Conagra successfully raised product prices multiple times over the past few quarters, leading to a significant increase in gross margins by 354 basis points to 28.3% in the first quarter.

However, the company experienced a decline in volumes as customers became more cautious about spending on branded food items at higher prices. Consequently, Conagra missed quarterly sales estimates and maintained its conservative annual sales and profit forecasts. The company anticipates its annual organic net sales growth to be around 1% and adjusted EPS to range between $2.70 and $2.75.

CFRA Research’s Arun Sundaram expressed concerns about the negative aspects of Conagra’s performance, particularly the decline in organic sales growth and significant drop in volumes. Sundaram highlighted the risk of a potential forecast cut later in the year, as Conagra is heavily relying on a strong second half to meet its targets.

During the reported period, Conagra witnessed a 6.6% decrease in sales volumes, while average selling prices rose by 6.3%. Although the company’s earnings per share of 66 cents surpassed estimates of 60 cents, its net sales of $2.90 billion fell short of analysts’ expectations of $2.95 billion.

It is worth noting that peer company General Mills also faced a similar situation, with higher prices impacting volumes as consumers adopted a more cautious approach.

While Conagra’s first-quarter results may have disappointed some investors, the company remains optimistic about its future performance. With a focus on mitigating cost pressures and driving sales growth, Conagra aims to regain momentum and deliver strong results in the coming quarters.