Conagra Brands stock rose by $1.11 to $29.34 per share (+3.93%) on March 31, following word that the diversified retail food products company’s sales have risen significantly thus far in the fourth quarter. The increase is attributed to consumer stockpiling triggered by panic buying due to fear of the spreading Covid-19 contagion and anticipation that restaurants and other foodservice outlets will remain closed for some time to come in the United States.
Net sales for the third quarter ending on February 23, however, were down by 5.6% to $2.6 billion. Gross profit decreased by 9% o $684 million. The figures were in line with expectations, according to Sean Connolly, the Chicago-headquartered company’s president and chief executive officer.
“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,” said Connolly. “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.
“Our teams have remained agile in responding to the elevated demand, and our supply chain has performed extremely well to fulfill customer orders. 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.”
Third Quarter Results
During Q3, the company’s Refrigerated & Frozen segment performed better than all others, though sales slipped by 1.6% to $1.08 billion in the three-month period. That compared with a decrease of 9.5% to $1.02 billion in Grocery & Snacks, an 8% downturn to $234 million in Foodservice, and a 3.2% decline to $221 million in the International segment.
The divestiture of the Gelit and Lender’s Bagel businesses subtracted 1.9% from Refrigerated & Frozen results. Organic net sales increased 0.3%. On an organic net sales basis, volume decreased 0.4% and price/mix increased 0.7%.
Birds Eye, Healthy Choice and Gardein Fare Well
On the frozen business front, several brands such as Birds Eye, Healthy Choice, and Gardein continued to report solid organic growth in the quarter. Additionally, the fiscal 2020 frozen innovation, which was launched earlier in the fiscal year across multiple brands, continued to perform well in-market.
Several business sectors, however, including frozen single serve meals, experienced softer-than-expected growth associated with unfavorable category dynamics and a relatively warmer winter.
A number of refrigerated brands also declined in the quarter. Increased price/mix in the segment was primarily driven by favorable mix from the continued strength in the company’s innovation.
Operating profit for the segment increased 0.8% to $191 million in the quarter. Adjusted operating profit decreased 0.3% to $201 million as the benefit of realized productivity improvements and cost synergies were more than offset by higher input costs, the lost profit from the sold businesses, and higher inventory write-offs.
Conagra’s closing share price of $29.34 on March 31, while up 3.93% for the day, was down from the year-to-date high of $33.63 charted on January 2. Its 2020 low of $24.24 was recorded on March 12, and a 52-week high of $35.07 was achieved on December 16, 2019.
Looking at the big picture, the New York Stock Exchange (NYSE) composite index is down by more than 38% from its 52-week high of 14,183.26. Volatility has been especially pronounced from February 21 to March 23, as a string of major selloffs attributed to the impact of the coronavirus crisis on the global economy resulted in trillions of dollars of lost wealth. At the close of business on March 31 the NYSE composite index stood at 10,301.87, down by 132.88 points or 1.27% for the day. – Reported by John Saulnier