Conagra Brands ((CAG)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Conagra Brands’ recent earnings call painted a mixed picture, highlighting both successes and challenges. The company celebrated achievements in divestitures, debt reduction, and supply chain performance. However, these positives were tempered by declines in net sales, reduced earnings per share (EPS), and ongoing inflationary pressures.
Successful Divestitures and Debt Reduction
Conagra Brands successfully completed the divestitures of Chef Boyardee, Van de Camps, and Mrs. Paul’s, using the proceeds to reduce net debt by more than $400 million in Q1. This strategic move underscores the company’s commitment to strengthening its balance sheet and focusing on core areas of growth.
Frozen Portfolio Performance
The frozen portfolio showed solid progress, with volumes improving 3.2 points in Q1 compared to Q4 fiscal 2025. This growth was driven by service recovery and share gains in frozen vegetables, meals, and prepared chicken, highlighting the company’s effective strategies in this segment.
Supply Chain Success
Conagra achieved impressive supply chain metrics, with 98% service levels in Q1 and productivity gains exceeding 5% of the cost of goods sold. These results were attributed to core productivity programs and effective tariff navigation, showcasing the company’s operational efficiency.
Snacking Domain Growth
The snacking domain experienced strong volume growth, particularly in strategic protein snacks categories. Meat snacks were up 4%, and seeds increased by 2%. Despite some merchandising timing shifts, the overall snacks volume performance exceeded category averages, indicating robust consumer demand.
Decline in Organic Net Sales
Conagra Brands reported organic net sales of $2.6 billion, marking a 0.6% decline compared to the previous year, with volumes down 1.2%. This decline reflects the challenges the company faces in maintaining sales momentum amidst a tough economic environment.
Adjusted Earnings Per Share Drop
Adjusted EPS for Q1 was $0.39, down $0.14 from the year-ago period. This decrease was driven by lower adjusted operating profit and a higher adjusted tax rate, highlighting the financial pressures impacting the company’s bottom line.
Elevated Inflation and Tariffs
Inflation remained a significant challenge, with rates approximately 7% in Q1. Proteins were a major headwind, and higher-than-expected tariff costs further affected operating margin expectations, underscoring the external pressures on Conagra’s financial performance.
Grocery and Snacks Margin Decline
The adjusted operating margin in Grocery and Snacks declined by 97 basis points due to an unfavorable product mix and higher inflation, despite select price increases. This highlights the ongoing margin pressures in these key segments.
Forward-Looking Guidance
In its forward-looking guidance, Conagra Brands reaffirmed its full-year outlook despite a challenging environment. The company projects organic net sales growth between -1% and +1%, an adjusted operating margin of approximately 11% to 11.5%, and adjusted EPS ranging from $1.7 to $1.85 per share. Conagra emphasized its strong execution in frozen and snacking strategies and remains committed to a balanced capital approach, including significant planned capital expenditures and maintaining a steady dividend rate.
In summary, Conagra Brands’ earnings call reflected a balanced view of its current financial health and future prospects. While the company has made significant strides in debt reduction and operational efficiency, it continues to face challenges from declining sales and inflationary pressures. The reaffirmed guidance suggests cautious optimism as Conagra navigates the complexities of the current market environment.