Conagra sales volumes dip as new CEO Brase grapples with inflation pressures

By Koyena Das and Alexander Marrow

Sept ‌30 (Reuters) - Conagra Brands ​posted a ​volume-led decline in first-quarter organic net sales on Wednesday, with high inflation and price-sensitive consumers hampering new CEO John Brase's efforts to turn around the packaged foods ‌company.

The Slim Jim meat sticks maker, whose shares slumped more than 5.5% to ⁠an over three-month low, reaffirmed its fiscal 2027 guidance for an organic net sales decline of 1% to 3% ‌from a year earlier, although first-quarter ‌profit and sales beat Wall Street estimates, according to LSEG data.

"You definitely have a pressured consumer," Brase told Reuters. "There's no doubt about it."

Conagra had halved its annual dividend in July and ​said it was reviewing its non-core assets, with Brase, who took over in June, stating that brands that were not playing a great strategic role could be divested and others added.

Persistent ⁠inflation — especially in gas prices — and higher borrowing costs have pressured household budgets, prompting consumers to trade down to cheaper private-label ​alternatives, while the rapid adoption of GLP-1 weight-loss drugs is forcing packaged food makers to reformulate products to meet demand for healthier food.

The company expects full-year ​volume declines in the mid-single digits "factoring in greater-than-historical volume ‌elasticities, particularly within our frozen business," CFO Dave Marberger said in pre-recorded remarks.

Pricing and product mix contributed 1% to total organic net sales in the ⁠first quarter, with volumes down 2.1%, Conagra said.

The drop in sales volumes, inflation pressures and unfavorable operating leverage led to a 3.9% drop in adjusted gross profit to $619 million during the quarter, a fall that was ⁠slightly offset by $4 million in tariff refunds.

Marberger said that inflation has accelerated around transportation, because "our freight costs have been ​going up significantly." Prices for animal proteins — particularly chicken, beef and pork — have been more favorable, he added.

Quarterly net sales in the refrigerated and frozen segment fell 2.1% from a year earlier, while volumes decreased 1% and ‌prices fell 1.5%.

"The core challenge remains unchanged: six consecutive years of volume declines, a portfolio that management acknowledges is too large and too complex, and ‌a consumer environment that is unforgiving of pricing missteps," said RBC analysts in a note.

The company's total ⁠quarterly net sales came in at $2.60 billion, ‌narrowly beating estimates of $2.59 billion.

Quarterly ​adjusted earnings per share stood at 41 cents, compared with analysts' estimates of 28 cents.

(Reporting by Koyena Das in Bengaluru and Alexander Marrow in London; Editing by ‌Jonathan Ananda)

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