Conagra Brands' transformation on track

by Monica Watrous
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Conagra Brands
Net income attributable to Conagra Brands in the second quarter ended Nov. 26 was up 83% from the year-ago period.

CHICAGO — It has been a year since Conagra Brands, Inc. reintroduced itself as a branded pure-play packaged food company, following the exit of its private brands business and successful spin-off of Lamb Weston as a public company. In the months that followed, the company has worked tirelessly in remaking its core business and culture into a “more energized, competitive unit,” said Sean M. Connolly, president and chief executive officer.

Sean Connolly, ConAgra
Sean M. Connolly, president and c.e.o. of Conagra Brands

“When compared to where we were just three years ago, the transformation has been quite remarkable,” Mr. Connolly said during a Dec. 21 earnings call. “It’s been heavy lifting unwinding decades of ingrained behaviors, but we like where we are, and we’re confident in our future.”

Net income attributable to Conagra Brands in the second quarter ended Nov. 26 totaled $223.5 million, equal to 55c per share on the common stock, up 83% from $122.1 million, or 26c, in the year-ago period. Net sales of $2,173.4 million were up 4.1% from $2,088.4 million.

“Fiscal 2016 and 2017 were indeed a heavy lift, as we put in the work to thoughtfully and methodically upgrade our revenue base and reset the top line by cutting back on excessive, deep discount promotions and rationalizing a long tail of low performing s.k.u.s (stock-keeping units),” Mr. Connolly said. “We also focused on improving efficiencies to build a strong foundation on the bottom line and expand margins. But, as we’ve said all along, we can’t cut our way to prosperity. We must grow the top line, and we will do it the right way, by investing in renovation and the innovation to achieve sustainable growth over the long term.

Conagra Brands snacks
Conagra Brands' net sales of $2,173.4 million were up 4.1% from $2,088.4 million.

“As we entered fiscal 2018, we were working from a much stronger revenue base. We have a healthier, less promotional business in U.S. retail. And our focus is now on improving brand saliency, which means reacquainting consumers with our modernized brands and making them top of mind again. Accordingly, we’re making investments in innovation and renovation to enhance distribution, merchandising and consumer trial to drive top-line growth. And top-line growth is exactly what we’ve achieved.”

For the first six months of the year, net income of $376 million, or 91c per share, was up 22% from $308.3 million, or 48c, while net sales of $3,977.6 million were down 0.2% from $3,984 million.

Looking ahead, executives expect organic net sales and adjusted earnings per share to be near the high end of the respective guidance ranges as the company continues to invest “above the line and below the line,” behind its brands in the second half of the year, Mr. Connolly said.

“One of the most compelling reasons for our optimism continues to be the success of our innovation slate, which is building distribution and performing well in its early days in the market,” he said. “We started rebuilding our innovation slate with a focus on our frozen business. And you can expect to see us apply the same level of rigor and discipline across our portfolio where we see opportunity.” 
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