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Shares of Conagra Manufacturers Inc. (NYSE: CAG) have been up over 1% on Friday, a day after the corporate delivered blended outcomes for the primary quarter of 2024. The inventory has dropped 31% year-to-date. The branded meals producer’s efficiency was impacted by a slowdown in consumption and shifts in shopper conduct. Conagra expects gross sales to say no once more within the second quarter earlier than choosing up through the again half of the 12 months. Listed here are a couple of factors to notice in regards to the Q1 efficiency:
Combined outcomes
Conagra’s Q1 2024 web gross sales of $2.9 billion remained flat in comparison with the identical interval a 12 months in the past. On an natural foundation, web gross sales dropped 0.3% as a consequence of a 6.6% decline in quantity attributable to an industry-wide slowdown in consumption and modifications in shopper conduct. Internet gross sales additionally fell wanting expectations.
The corporate reported GAAP earnings of $0.67 per share in Q1 versus a lack of $0.16 per share within the year-ago quarter. Adjusted EPS rose practically 16% year-over-year to $0.66 and surpassed analysts’ projections as nicely.
Difficult {industry} developments
Conagra’s prime line efficiency within the quarter was impacted by an industry-wide slowdown in consumption. This slowdown will now result in volumes taking longer than anticipated to get well. As talked about on the corporate’s quarterly convention name, shoppers coping with monetary pressures are adjusting their purchases as a way to make their budgets work.
Together with lowering discretionary purchases, shoppers are utilizing up family stock left over from the pandemic. Buyers are turning to extra hands-on meals prep to economize reasonably than choosing handy meals merchandise. They’re additionally losing much less meals and utilizing up leftovers extra. Conagra believes these near-term shifts in shopper conduct are short-term.
The corporate’s gross sales in staples remained flat in Q1 in comparison with the prior-year interval whereas it grew unit share in classes like canned tomato and canned chili. The snacks class continued to see development as demand for microwave popcorn and ready-to-eat pudding and gel remained wholesome.
In Q1, Conagra’s Refrigerated & Frozen phase noticed gross sales decline by practically 5% as a consequence of a ten% drop in quantity attributable to the current consumption developments. Gross sales within the Grocery & Snacks phase inched up by 1.2% within the quarter.
The Worldwide phase noticed sturdy gross sales development of over 11% helped by improved worth/combine and quantity development. Quantity development is anticipated to proceed on this phase for the remainder of the 12 months. Foodservice gross sales elevated 5.2% helped by worth/combine. This momentum is anticipated to proceed via the 12 months.
Outlook
Conagra expects natural web gross sales to say no within the low single digits within the second quarter of 2024. Quantity declines are anticipated to enhance versus the primary quarter as inflation-driven pricing actions from FY2023 are wrapped. Gross and working margins are anticipated to be down sequentially whereas adjusted EPS is anticipated to be approx. flat to Q1.
For the again half of the 12 months, the corporate expects natural web gross sales development within the low single digits, pushed by year-over-year quantity development. Adjusted EPS within the second half of FY2024 is anticipated to be approx. flat to the identical interval in FY2023.
For FY2024, Conagra expects natural web gross sales to develop approx. 1% YoY. Adjusted EPS is estimated to vary between $2.70-2.75. Adjusted working margin is anticipated to be 16.0-16.5%.
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