Updated version 3 - Conagra sales decline, new CEO Brase strives to cope with inflationary pressure

Title rewritten, CFO comments added in paragraph 6, analyst comments added in paragraph 11, and more details included throughout

Reuters, September 30 - Conagra Brands (CAG.N) announced on Wednesday that its first-quarter organic net sales declined due to a drop in volume. High inflation and price-sensitive consumers have hampered new CEO John Brase’s efforts to turn around this packaged foods maker’s slump.

Back in July, Conagra halved its annual dividend and said it was reviewing its non-core assets (link). Brase, who took over as CEO in June, said that brands with little strategic value may be divested, while other brands could be brought in.

According to data compiled by London Stock Exchange Group (LSEG), shares of the company, known for its production of “Slim Jim” meat snacks, fell about 4.5% in premarket trading. Although its first-quarter profit and sales topped Wall Street estimates, the company reaffirmed its guidance for fiscal 2027, expecting organic net sales to decline 1% to 3% year over year.

“While there’s more work to do, we remain on track to achieve our annual objectives,” Brase said.

Persistently high inflation—especially soaring gasoline prices—combined with rising borrowing costs are putting pressure on household budgets and prompting consumers to shift to cheaper private-label alternatives; at the same time, the rapid uptake of GLP-1 weight-loss drugs is forcing packaged food makers to adjust product formulations to meet consumer demand for healthier options.

“Given that volume elasticity remains above historical levels—especially in our frozen foods business—we continue to expect a mid-single-digit decline in volume for the full year,” CFO Dave Marberger said in a pre-recorded statement, indicating consumers are particularly sensitive to price increases.

Conagra said pricing and product mix contributed a 1% gain to total organic net sales, while volume declined by 2.1%.

Declining volumes, inflationary pressures, and unfavorable operating leverage together led to a 3.9% drop in adjusted gross profit for the first quarter, down to $619 million, with the decrease partially offset by a $4 million tariff rebate.

The refrigerated and frozen foods division saw quarterly net sales decline by 2.1% year over year, with volumes down 1% and prices falling 1.5%.

“Core challenges remain unchanged: volumes have declined for six straight years, management acknowledges that the product portfolio is too broad and complex, and the consumer environment is unforgiving of pricing missteps,” RBC analysts wrote in a note.

The company’s total net sales for the quarter came in at $2.6 billion, slightly above the expected $2.59 billion.

Adjusted earnings per share for the quarter were 41 cents, compared to analyst estimates of 28 cents.

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