Conagra Brands: Sales, Profits Down As Company Restores Service Levels

Amid efforts to restore its service levels, Conagra Brands posted net sales and profit declines during the first quarter of fiscal 2026, according to its quarterly earnings report released today.

In the quarter ended August 24, the Marie Callender’s and Duncan Hines maker saw net sales drop 5.8% year-over-year to $2.6 billion, reflecting the unfavorable impacts of M&A and foreign exchange. Gross profit decreased 13.4% to $641 million, driven by lower net sales and lost profit from divested businesses.

Even so, CEO Sean Connolly said Conagra’s first quarter performance showed the company is “on track” with priorities across its portfolio. The company has restored customer service levels to 98% during the quarter, allowing it to resume merchandising and improve consumer engagement.

“As you may recall, we had six or seven quarters of straight top-line improvement as we invested in the pursuit of volume last year, and returned to growth in Q2 2025, so we’ve got clear evidence our brand and innovation are working for consumers,” said Connolly, adding that 44% of Conagra’s portfolio held or gained volume share in the quarter.

He continued, “Now that we’ve got service levels back, we’re armed with the confidence that we can generate consumer pull with these products and are convinced we have inventory in place so we don’t fall out of stock again.”

Seeking to improve its balance sheet, Conagra has doubled down on its portfolio reshaping efforts over the past year. This includes the divestitures of Chef Boyardee, Van De Camp’s and Mrs. Paul’s businesses.

The sale of these businesses has shifted the company’s mix more toward frozen food and snacks, which now represent approximately 70% of Conagra’s portfolio. During today’s earnings call, executives highlighted these two categories as key growth drivers in the first quarter, including Dolly Parton’s new frozen meals and desserts and Slim Jim’s meat stick collaboration with Buffalo Wild Wings.

Volumes in the company’s frozen portfolio improved by 3.2 basis points, aided by service recovery. The brand’s frozen vegetables, frozen meals and frozen prepared chicken products – which had been heavily impacted by supply chain constraints last quarter – all saw share gains. Volume sold on promotion was also up.

“It’s all about getting back in the queue on merchandising events with customers and making sure that innovation looks good. Those businesses will have a positive trajectory as we move through the year and we’ve got margin clawback opportunities in front of us,” said Connolly.

Looking ahead, the Boomchickapop and Reddi Wip producer has reaffirmed its fiscal 2026 guidance, expecting net sales growth between negative 1% to positive 1%, adjusted operating margin between 11% and 11.5%, and adjusted EPS between $1.70 and $1.85.

As persistent tariffs and inflation have “drifted higher” than Conagra’s initial expectations, the company has raised its outlook for core inflation, primarily driven by increased costs in animal proteins such as beef, pork and turkey. On the tariff front, the company expects gross exposure to be roughly 3% of cost of goods sold.

While Conagra didn’t share specific plans for potential future divestitures, Connolly said the company “[continues] to look for ways to sharpen and strengthen our portfolio.”