Shares in ConAgra Foods fell more than 7% today (18 June) after the US firm announced its annual earnings per share would be “below plan”, for a third time this year.
The Healthy Choice frozen foods maker said it expected earnings per share for the fourth quarter, excluding items affecting comparisons with last year, to be $0.55.
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ConAgra had forecast EPS on that basis would be $0.60. It pointed to a 7% decline in consumer food volumes in the three months to 25 May, as well as weak profits from its private brands division.
ConAgra, which made a big bet on own label in the US last year with the acquisition of private-label supplier Ralcorp Holdings, also said its current profit projections for its private brands division “are below original plans for the next several years”. That forecast comes despite the synergies ConAgra says it is still generating from the division.
The revised outlook for ConAgra’s private-label business, as well as its expectations for “continued profit challenges for some retail brands”, primarily Chef Boyardee, have resulted in $681m of non-cash impairment charges for the fiscal 2014 fourth quarter.
ConAgra said most of the charges “relate to the private brands segment” and reduce the amount of goodwill and other intangibles its balance sheet. The resulting non-cash expenses will be treated as items impacting comparability.
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By GlobalDataRodkin said ConAgra was working on improving its consumer and private-label businesses.
“We are in the process of improving product mix and promotion strategies in the consumer foods segment for better results and greater effectiveness, and we expect our volume performance to improve in fiscal 2015 as a result of this. Given the profit challenges in our private brands segment, we are also focused on margin improvement initiatives to offset the impact of pricing concessions,” Rodkin said. “Even though our earnings are below expectations, we exceeded our fiscal 2014 operating cash flow and debt reduction targets.”
He added: “We are in the process of gradually strengthening several areas of our company. We anticipate fiscal 2015 to be a year of stabilisation and recovery that delivers mid-single-digit comparable EPS growth.”
ConAgra’s fourth-quarter and full-year results will be announced on 26 June. Shares in ConAgra had fallen 7.55% to $30.38 at 12:18 ET.
