A surge in own label sales more than offset softness in the consumer brands business of ConAgra Foods.
In a trading update today (20 March), ConAgra revealed that total sales increased 22.1% in the first nine-months of the year, climbing to US$13.2bn.
Gains were driven by a 307% rise in sales of private brands. Growth at this unit more than offset the decline of ConAgra’s branded business. Conagra, which includes Chef Boyardee and Healthy Choice among its branded stable, said that consumer food sales dropped 1.7% in the period.
Operating profit was also down 1.1% in the consumer business. However, a near 850% increase in profitability at the group’s private brand unit drive a 9.4% rise in group operating profit, which climbed to US$1.4bn in the nine-months. Net income was up 7.5% to $636.5m, from $592.1m last year.
The company, which beefed up its private label presence with the acquisition of Ralcorp Holdings, said profitability was aided by the ongoing realisation of synergies from the deal.
Assessing the result, Janney Montgomery Scott analyst Jonathan Feeney was upbeat on the firm’s long-term prospects as a potential consolidator in the US private label sector.
“Beyond 2014, we see potential for improved cash flow driven by Ralcorp synergies, lower restructuring charges, and improved growth as ConAgra leads an intelligent, decade-long consolidation of the fragmented private label food industry,” he wrote in a note to investors.