Conagra holds annual outlook steady after weak quarter and impairment hit

USA – Conagra Brands left its annual sales and earnings targets unchanged after delivering a subdued second quarter marked by falling volumes, strained consumer demand and a large impairment charge that tipped results into the red.

The owner of Slim Jim meat snacks and Hunt’s ketchup said demand for its core grocery products remained uneven as shoppers continued to rein in spending and competition across store shelves intensified.

During the quarter, Conagra posted a net loss of US$663.6 million, compared with a profit of US$284.5 million a year earlier, after booking a US$968 million non-cash impairment charge linked to a prolonged decline in its share price.

The company’s stock has shed about 36 percent of its value so far this year, reflecting persistent pressure from supply chain disruptions, elevated ingredient costs and weaker demand as budget-conscious consumers trade down.

Net sales fell 6.8 percent to US$2.98 billion, broadly in line with expectations, while overall volumes declined 3 percent after posting modest growth in the same period last year.

On an adjusted basis, Conagra reported earnings of 45 cents per share, edging past analyst forecasts despite ongoing cost and demand challenges.

Chief executive Sean Connolly said household finances remained stretched, with value-seeking behaviour continuing to weigh most heavily on lower- and middle-income consumers.

Even so, the company reaffirmed its full-year guidance for the second time this year, expecting net sales to range between a 1 percent decline and a 1 percent increase, alongside adjusted earnings per share of between US$1.70 and US$1.85.

Connolly also said Conagra is not pursuing acquisitions and is instead prioritising cash generation and debt repayment, while remaining open to selective brand divestments following the sale of Chef Boyardee earlier this year.

Supply chain investment and production recovery

The update follows Conagra’s earlier disclosure that it plans to spend about US$450 million in capital expenditures during fiscal 2026, with part of the funding intended to address operational setbacks experienced in the previous year.

Fiscal 2025 was affected by stalled chicken production, shortages of frozen vegetables and higher packaging costs driven by tariffs on tinplate steel, prompting management to reassess its manufacturing resilience.

As part of that effort, Conagra is expanding chicken processing capacity after demand for Banquet Mega Chicken Filets exceeded internal forecasts and exposed constraints in its existing facilities.

Earlier that year, the company temporarily shut down its main chicken plant after identifying product quality issues and relied on third-party producers to maintain supply, a move that increased costs.

Upgrades at the facility are now underway, with completion expected early in the second quarter of the current fiscal year, as Conagra works to stabilise production and reduce future disruptions.

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