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Conagra Warns Inflation Will Take Bigger Bite Out Of Margins

By Dayeeta Das
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Conagra Warns Inflation Will Take Bigger Bite Out Of Margins

Conagra Brands Inc missed market expectations for quarterly profit and warned of weaker full-year margins as the Slim Jim beef jerky maker reels under a surge in the price of raw materials and shipping costs.

Packaged food companies have come under pressure in recent months from soaring prices of commodities such as wheat, sugar and edible oils, while an overburdened supply chain has driven up their freight costs.

Conagra said it expected full-year adjusted operating margin to come in around 15.5%, compared with about 16% estimated previously.

"We expect to continue experiencing cost pressures above original expectations in the second half of fiscal 2022," chief executive officer Sean Connolly said in a statement.


The Duncan Hines cake mixes maker projected gross inflation to be 14% for the year, higher than its previous view of about 11%.


The company said it brought in another round of price increases during December, the benefit of which was expected in the second half of the year.

"We probably won't see the fruits of those efforts until inflation begins to subside ... we eventually should see better profit growth, but are uncertain when that might occur," Edward Jones analyst John Boylan said.

Still, the price hikes and a sustained at-home cooking boom helped Conagra top sales estimates for the second quarter and raise its core sales forecast for the full year.

Second Quarter Performance

Net sales rose 2.1% to $3.06 billion in the second quarter, beating analysts' estimates of $3.02 billion, according to Refinitiv data.


Conagra also lifted its annual core sales forecast to a rise of about 3%, from its prior estimate of a 1% growth.

Net income attributable to the company declined to $275.5 million, or 57 cents per share, in the quarter ended Nov. 28, from $378.9 million, or 77 cents per share, a year earlier.

On an adjusted basis, it earned 64 cents per share, missing estimates of 68 cents per share.

The company reported net sales of $2.65 billion (€2.29 billion) in the first quarter of its financial year, compared with $2.68 billion (€2.32 billion) a year earlier, beating analysts' average estimate of $2.54 billion (€2.2 billion).

News by Reuters, edited by ESM. For more A-Brands news, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.

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