Conagra: Grocery & Snacks, Chilled Segments Drive Q2 Sales +8.6%, Full Year Expectations Raised
Conagra Brands posted single-digit sales growth in its Q2 FY2023 earnings report Thursday morning, leading the company to raise its guidance for earnings per share and sales for the second half of the year.
The Chicago-based food giant announced Q2 organic net sales were up 8.6% year-over-year to $3.3 billion despite the ongoing supply chain crisis and inflationary pressures, largely attributed to inflation-driven price increases that went into effect in Q1.
“Our strong performance during the first half of fiscal 23 was primarily driven by a combination of justified pricing actions and muted elasticity, reflecting the strength of our brands,” said Conagra president and CEO Sean Connolly during a call with investors. “Consumers continued to recognize the value of our brands despite the higher prices, allowing us to gain share in key domains such as frozen and snacks.”
The strong quarterly growth was also driven by margin improvements in the company’s Grocery & Snacks and Refrigerated & Frozen segments, which saw sales increase 6.8% to $1.3 billion and 10.5% to $1.4 billion, respectively.
Within the Grocery & Snacks segment, price/mix increased 18.4% while volume decreased 11.6% and the company gained share in snacking categories including meat snacks and microwave popcorn. In the Refrigerated & Frozen segment, price/mix increased 16% while volume decreased 5.5% and the company gained share in frozen single-serve meals, plant-based protein and frozen breakfast.
Net sales in the international segment did not fare as well during the quarter, decreasing 1.3% to $259 million. The drop in sales reflected a 3.4% decrease from the “unfavorable impact” of foreign exchange and a 2.1% increase in organic net sales.
“We’ve got a great suite of brands to continue to extend them into adjacencies, like multi-serve meals, appetizers, snacks, desserts, novelties and things like that,” said Connolly during the call. “There are a lot of zip codes in the frozen space that still have the opportunity to be overhauled the way we’ve overhauled our frozen meals.
As a further reflection of Conagra’s optimism, the company raised its outlook for FY2023, accounting for supply chain efficiencies tied to the “volatile” operating environment, gross inflation and results from its Ardent Mills joint venture.
The most notable adjustment is the company’s organic net sales, which are now projected to increase from 7% to 8%, a jump from its previous expectation of 4% to 5% growth. Adjusted operating margins are expected to increase 15.3% to 15.6%, up from the previous projection of $15%.
Additionally, adjusted EPS is now projected to increase from $2.60 to $2.70, up from the previous expectation of $2.38 to $2.48.
