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Conagra Brands Inc ( CAG.N ) on Thursday (Oct 6, 2022)
missed quarterly sales and profit estimates boosted by higher prices for its
Mary Calendar and Slim Gym brands even as consumer demand weakened under the
weight of decades of high inflation.
Global food companies have raised prices over the past year
to protect profit margins, which have been squeezed by higher freight and labor
costs and spiraling costs of raw materials such as corn, wheat, protein and
edible oil.
However, consumers are beginning to show signs of becoming
more price-sensitive, and analysts worry Americans are looking for more
affordable options as persistent inflation erodes consumers' spending power.
Conagra noted store label brands are gaining share in certain categories versus 2019 levels, echoing sentiments from peers Campbell Soup Co(CPB.N) and J.M. Smucker Co (SJM.N).
Still, Conagra Chief Executive Sean Connolly announced
further price hikes in the third quarter although he expects volumes to remain
challenged in the second quarter.
"I think the operating environment for Conagra Brands
as well as the entire package food industry is becoming a little bit more
challenging and I say that ... because every dollar of additional price
increases will be harder to come by," CFRA analyst Arun Sundaram said.
"That's just because the demand environment while still
highly favorable is not as strong as it was over the past two years,"
Sundaram added.
Shares of Conagra, known for brands such as Bird's Eye and
Chef Boyardee, fell about 2% as the company reported a 4.6% decline in sales
volume in the reported quarter, which was offset by a 14.3% increase in average
selling price.
On an adjusted basis, the company earned 57 cents per share,
beating estimates of 52 cents per share, according to Refinitiv's IBES data.
Source Online
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