Slower than anticipated holiday restaurant traffic in December following by weakness at the retail level in January and third quarter (which ends on February 23) consumption declines has prompted Conagra Brands to reassess its fiscal 2020 outlook. A downward revision was announced on February 17, one day ahead of its presentation at the Consumer Analyst Group of New York (CAGNY) Conference.
The Chicago, Illinois, USA-headquartered company, a major brand player in the retail frozen food products market, now expects fiscal 2020 organic net sales growth to be flat to 0.5%, which is below prior guidance of 1%-1.5% growth. Adjusted operating margin is forecast to be 15.8% to 16.2%. Adjusted diluted earnings per share from continuing operations are expected to be in the range of $2.00 to $2.07.
President and CEO Sean Connolly, president and chief executive officer, commented: “Consumption softness in the quarter first emerged in the foodservice industry, with holiday restaurant traffic weaker than last year. Softness pivoted to retail in January and impacted numerous categories across food, including several in which we compete. While we planned for tougher year-over-year comparable results in the third quarter, we did not plan for this level of category softness.”
He continued: “Despite the unplanned third quarter consumption downturn, we remain encouraged by the health of our brands and the traction we have made on our fiscal 2020 innovation slate. We have gained share in many of our categories during the quarter and, based on our analysis, believe the recent consumption weakness is abating. We expect a resumption of year-over-year organic net sales growth in our fourth fiscal quarter.”
Generating approximately $10.5 billion in sales last year, 91% of which was in the retail sector, Conagra is the fourth largest food company in the USA. Its frozen product sales figure of $5.1 billion is second only to Nestlé’s $7.4 billion receipts in the category, and well ahead of #3 Tyson’s $3.8 billion.
Among Conagra’s retail frozen food brands are Birds Eye, Healthy Choice, Marie Calender’s, Gardein, Banquet, Evol, Bertoli, P.F. Chang’s, Tennessee Price, Fontera, Hungry Man, Mrs. Paul’s and Van de Kamp’s.
The company remains committed to achieving its fiscal 2021 leverage goal. In addition, it is also committed to delivering on its fiscal 2022 targets, which have been updated for recent divestitures.
Connolly noted: “We remain confident in our brands, the proven Conagra Way playbook and the long runway of growth ahead. As such, we are reaffirming our commitment to achieving our fiscal 2021 deleveraging and delivering on our long-term fiscal 2022 targets.”