Conagra trims revenue forecast as greater inflation, promotions to dent margins

By Savyata Mishra

(Reuters) -Conagra Manufacturers on Thursday joined rival Normal Mills (NYSE:GIS) in trimming its annual revenue forecast and warning that worth cuts on its merchandise throughout grocery, snacks and frozen meals objects to spark demand will weigh on margins.

Customers, cautious of upper grocery costs, have turned to cheaper non-public label manufacturers, hurting gross sales at packaged meals corporations together with Conagra, Campbell’s Co, Kraft Heinz (NASDAQ:KHC) and JM Smucker (NYSE:SJM).

In response, these corporations have ramped up promotions on their branded meals merchandise this 12 months, introducing smaller pack sizes and growing promoting to entice buyers.

Conagra, which usually caters to extra budget-strapped clients, stated volumes improved within the snacking and staples classes resembling microwave popcorn, and frozen greens on the again of promotions, thought it stays cautious on deep discounting.

“We’re nonetheless seeing value-seeking behaviors, with customers prioritizing affordability and maximizing worth,” CEO Sean Connolly stated in ready remarks.

Conagra expects rising cocoa and sugar costs to stress its margin and stated a stronger greenback would damage its worldwide phase gross sales within the again half of the 12 months.

“Firm’s up to date view higher displays the buyer setting however the pivot to ramp merchandising takes a toll on margins,” RBC analyst Nik Modi stated.

Conagra now expects fiscal 12 months 2025 adjusted revenue per share within the vary of $2.45 to $2.50, in contrast with its prior goal of between $2.60 and $2.65.

It additionally lowered its adjusted working margin forecast to about 14.8%, from a spread of 15.6% to fifteen.8%.

Shares of the Slim Jim beef jerky maker have been down 2% in early commerce, after having declined about 4% this 12 months.

The corporate posted a smaller-than-expected drop in second-quarter gross sales as worth cuts throughout its classes helped prop up demand that has slowed over the previous couple of years.

Internet gross sales got here in at $3.20 billion for the three months ended Nov. 24, in contrast with analysts’ common estimate of $3.15 billion, in response to information compiled by LSEG.