Conagra Brands has announced the results for the second quarter of fiscal year 2024, which ended on November 26, 2023.
According to a release from the company before its scheduled earnings call with investors and analysts on January 4, 2024, the Conagra Brands says the company is lowering its fiscal 2024 organic net sales growth, operating margin, and adjusted EPS outlook to reflect year-to-date results, expectations for a slower volume recovery, and increased brand investments in the second half of the fiscal year.
The company is reporting for the quarter nets sales of $3.2 billion reflecting a 0.2% increase from the favorable impact of foreign exchange, and a 3.4% decrease in organic net sales.
Sean Connolly, president and chief executive officer of Conagra Brands, commented in the release before the earnings call that, "Despite an ongoing challenging macro environment, we saw several positive signs in Q2. In particular, volume trends in our domestic retail business improved substantially, as inflation-driven volume declines were cut in half compared to Q1. Most importantly, our targeted investments in our frozen business generated strong lifts and market share gains. These developments reinforced our confidence in investing to build momentum in the second half and set up a strong FY25."
The 3.4% decrease in organic net sales was driven by a 0.5% negative impact from price/mix, partially attributable to an increase in strategic investments, and a 2.9% decrease in volume, primarily due to continued lower consumption trends. Gross profit decreased 8.2% to $847 million in the quarter, and adjusted gross profit decreased 7.6% to $862 million.
In the quarter, net income attributable to Conagra Brands decreased 25.1% to $286 million, compared to $382 million in the prior year quarter driven primarily by the decrease in gross profit and increase in SG&A.
Conagra reported and organic net sales for the Grocery and Snacks segment decreased 4.1% to $1.3 billion in the quarter driven by a price/mix decrease of 0.4%, partially attributable to an increase in strategic investments, coupled with a volume decrease of 3.7%, primarily due to continued lower consumption trends. The company gained dollar share in snacking and staples categories including microwave popcorn and seeds, chili, and hot cocoa.
In the Refrigerated and Frozen Segment, reported and organic net sales decreased 5.8% to $1.3 billion in the quarter as price mix decreased 2.5%, partially attributable to an increase in strategic investments, and volume decreased 3.3%, primarily due to continued lower consumption trends. The company gained dollar share in select categories such as frozen sides and frozen breakfast and gained unit share in frozen single serve meals.
During his remarks to investors and analysts, Connolly stressed that frozen foods and meals will continue to be an important area of investment by Conagra.
In fact, while consumer shopping behaviour in the United States began to shift towards more budget-conscious spending when it came to meals, due to inflation impacting food prices, frozen meals continued to be something consumers want to spend money on.
“We saw some consumers looking toward alternatives, multi-serve meals and ‘from-scratch’ cooking to stretch their budgets,” he added. “We did not expect that trend to be lasting as the unshakable consumer demand for convenience, aligned with our innovation, has generated strong frozen demand for a long time.”
Conagra will continue to invest, Connolly continued, in innovations and in high-quality and healthy ingredients for frozen meals, as frozen, single-serve meals continue to provide the company with meaningful market share in the category.
In the Foodservice Segment reported and organic net sales increased 4.3% to $295 million in the quarter.