Conagra Brands Adjusts Profit Outlook Amid Price Cuts

By Savyata Mishra
(Reuters) – Conagra Brands on Thursday followed General Mills in reducing its annual profit forecast, citing that price cuts on grocery, snacks, and frozen food items to stimulate demand will affect margins.

Consumers, increasingly cautious about rising grocery costs, have shifted towards cheaper private label brands, negatively impacting sales for packaged food companies like Conagra, Campbell's Co, Kraft Heinz, and JM Smucker.

In response, these companies have focused on ramping up promotions for their branded food products this year, which includes introducing smaller pack sizes and enhancing advertising efforts to attract shoppers.

Conagra, typically catering to budget-conscious consumers, mentioned an improvement in volume for snacks and staples such as microwave popcorn and frozen vegetables, driven by promotions, although they remain cautious about significant discounting.

CEO Sean Connolly mentioned, "We're still seeing value-seeking behaviors, with consumers prioritizing affordability and maximizing value."

The company anticipates rising cocoa and sugar prices will continue to pressure margins, along with a stronger dollar adversely impacting international sales in the latter half of the year.

Analyst Nik Modi from RBC commented, "Company's updated view better reflects the consumer environment, but the pivot to ramp merchandising takes a toll on margins."

Conagra has revised its fiscal year 2025 adjusted profit per share estimate to $2.45 to $2.50, down from $2.60 to $2.65. Additionally, it lowered its adjusted operating margin forecast to about 14.8% from the previous range of 15.6% to 15.8%.

Shares of Conagra, the maker of Slim Jim beef jerky, dropped 2% in early trading after a 4% decline this year.

The company reported a smaller-than-expected decline in second-quarter sales, with price cuts across categories helping support demand, which has slowed in recent years. Net sales were recorded at $3.20 billion for the three months ending Nov. 24, outperforming analysts' average estimate of $3.15 billion, according to LSEG data.