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March 31, 2020

Conagra Brands expects to exceed guidance spurred by Covid-19-led retail gains

US food major Conagra Brands expects to exceed its previously announced outlook spurred by Covid-19-led retail gains.

By Dean Best

While many packaged food companies are withdrawing financial guidance because of the uncertainties related to coronavirus, US food major Conagra Brands expects to exceed its previously announced outlook.

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Conagra said today (31 March) it is seeing “significantly increased demand in its retail businesses” as a result of Covid-19, but at the same time foodservice is dwindling.

The New York-listed firm, which is the second-largest frozen food company in the US after Switzerland’s Nestlé, made the announcement in conjunction with its third-quarter results to 23 February. They showed sales were down on a reported and an organic basis, but not related to coronavirus. Instead, the declines were linked to recent divestitures.

Sean Connolly, Conagra’s president and chief executive, said: “In more recent weeks, the entire team at Conagra Brands has been focused on supporting our customers, consumers, employees, and communities in the face of the Covid-19 pandemic. 

“While we are still early in our fourth quarter, we have seen significantly elevated demand for our retail products as consumers have started filling their pantries for more at-home eating. On a quarter-to-date basis, shipments and consumption in our domestic retail business have increased approximately 50%, which have more than offset the impact of worsening trends in our foodservice business.” 

Conagra has updated its guidance for organic and reported sales, and the adjusted operating margin, to “above the high end” of previously announced ranges. Those are, in respective order: flat to up 0.5%; and increase of 10% to 10.5%; and for the margin, 15.8% to 16.2%.

However, the company also cautioned: “The impact that the Covid-19 pandemic will have on the company’s fiscal 2020 consolidated results of operations is uncertain. The dynamic nature of the current situation makes it challenging for management to estimate future performance of the businesses, particularly over the near term.”

It added that in the fourth quarter, the “company has also started to see reduced demand for its foodservice products and expects a 50%-60% decline in foodservice organic net sales. The company’s supply chain has effectively serviced demand to-date.”

Conagra reported a 5.6% decline in third-quarter net sales to US$2.6bn, which was attributed to a 4% decrease from the divestiture of its Wesson cooking oils business, the direct-store-delivery snacks unit, Gelit, Lender’s Bagel, “and the exit of the private-label peanut butter business”.

Sales fell 1.7% on an organic basis.

Elsewhere, adjusted EBITDA dropped 7.1% to $515m. Net income declined 15.6% to $204m, and on an adjusted basis was down 7.5% at $232m.

Connolly added: “I’d like to thank our front-line employees who continue to work tirelessly to provide much-needed food to consumers in this unprecedented time – their efforts have been inspiring. Although the situation remains highly dynamic and our ultimate results depend on an effective and uninterrupted supply chain, we now believe that we will exceed our fiscal 2020 sales and profit guidance.” 

Related Companies

Free Whitepaper
img

What is the impact of China’s Zero-COVID lockdowns on economic activity, consumer goods and the foodservice industry?

While wanting to protect the country from being overwhelmed by Omicron, China’s adherence to a Zero-COVID policy is resulting in a significant economic downturn. COVID outbreaks in Shanghai, Beijing and many other Chinese cities will impact 2022’s economic growth as consumers and businesses experience rolling lockdowns, leading to a slowdown in domestic and international supply chains. China’s Zero-COVID policy is having a demonstrable impact on consumer-facing industries. Access GlobalData’s new whitepaper, China in 2022: the impact of China’s Zero-COVID lockdowns on economic activity, consumer goods and the foodservice industry, to examine the current situation in Shanghai and other cities in China, to better understand the worst-affected industry sectors, foodservice in particular, and to explore potential growth opportunities as China recovers. The white paper covers:
  • Which multinational companies have been affected?
  • What is the effect of lockdowns on foodservice?
  • What is the effect of lockdowns on Chinese ports?
  • Spotlight on Shanghai: what is the situation there?
  • How have Chinese consumers reacted?
  • How might the Chinese government react?
  • What are the potential growth opportunities?
by GlobalData
Enter your details here to receive your free Whitepaper.

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