Results
Highlights
Reported net sales decreased 1.4%; organic net sales decreased 1.1%.
Reported operating margin was 10.3%; adjusted operating margin was 11.5%.
1Reported diluted earnings per share (EPS) was $0.36, a 5.9% increase.
6Adjusted earnings per share was $0.41, a 5.1% increase.
Outlook
The company is reaffirming its fiscal 2027 guidance, reflecting:Guidance reaffirmed
Results
Organic net sales change of (3)% to (1)% compared to fiscal 2026
Outlook
Adjusted operating margin between 10.0% and 10.5%
Adjusted EPS between $1.40 and $1.50
Management commentary
CEO Perspective
John Brase, president and chief executive officer of Conagra Brands, commented, “We delivered a solid start to fiscal 2027 with top line results largely in line with expectations and profit ahead of expectations amid a challenging operating environment.
Importantly, we are acting on our previously outlined priorities including restoring margins, increasing investment, reducing complexity, and rebalancing capital allocation, which are translating into measurable progress across the business.
While there is more work to be done, we remain on track to deliver the year and are reaffirming our fiscal 2027 guidance.”Guidance reaffirmed
Results
Total Company First Quarter Results
In the quarter, net sales decreased 1.4% to $2.6 billion, reflecting:
a 0.2% increase from the favorable impact of foreign exchange,
a 0.5% decrease from the impact of M&A, and
a 1.1% decrease in organic net sales.
The 1.1% decrease in organic net sales was driven by a 1.0% positive impact from price/mix and a 2.1% volume decrease.
In the quarter, the company gained dollar share in categories including frozen vegetables, pudding, chili, frozen breakfast, hot dogs, and frozen desserts.
Gross profit decreased 3.4% to $619 million in the quarter and adjusted gross profit decreased 3.9% to $619 million as higher productivity and approximately $4 million in tariff refunds were more than offset by lower organic net sales, the negative impact of cost of goods sold inflation, and unfavorable operating leverage.
Gross margin decreased 50 basis points to 23.8% in the quarter, and adjusted gross margin decreased 62 basis points to 23.8%.
Selling, general, and administrative expense (SG&A), which includes advertising and promotional expense (A&P), increased 4.4% to $350 million in the quarter primarily due to legacy legal matters.
4Adjusted SG&A, which includes A&P, decreased 3.7% to $321 million including a $10 million benefit related to fiscal 2026 incentive compensation, partially offset by a 15.1% increase in A&P to $61 million.
The company realized pension and postretirement non-service income of $6 million in the quarter, in line with the prior year.
In the quarter, equity method investment earnings increased 71.8% to $50 million primarily driven by favorable market conditions and effective management through recent volatility in wheat markets for the Ardent Mills joint venture.
Net interest expense was $92 million in the quarter.
Compared to the prior year period, net interest expense decreased 2.1% due to a reduction in total debt.
In the quarter, the effective tax rate was 25.2% compared to 43.1% in the prior year period, when the rate was affected by the Chef Boyardee and frozen seafood divestitures.
The adjusted effective tax rate was 24.8% compared to 25.0% in the prior year period.
5In the quarter, net income increased 6.0% to $174 million, or $0.36 per diluted share compared to $165 million, or $0.34 per diluted share in the prior year period.
2Adjusted net income increased 4.3% to $197 million, or $0.41 per diluted share, compared to $189 million, or $0.39 per diluted share in the prior year period primarily as a result of lower adjusted SG&A expense and higher equity earnings, partially offset by lower gross profit.
Adjusted EBITDA, which includes equity method investment earnings and pension and postretirement non-service income, increased 2.4% to $451 million in the quarter.
The weighted average diluted share count in the quarter was 480 million shares.
Capital return
In the quarter, the company paid a dividend of $0.35 per share.
Results
Grocery & Snacks Segment First Quarter Results
Net sales for the Grocery & Snacks segment decreased 2.6% to $1.1 billion in the quarter, reflecting:
a 0.6% decrease from the impact of M&A, and
a 2.0% decrease in organic net sales.
The decrease in organic net sales was driven by a price/mix increase of 3.4% and a volume decrease of 5.4%.
Operating profit for the segment decreased 21.5% to $205 million in the quarter and adjusted operating profit decreased 7.2% to $205 million as higher productivity was more than offset by lower organic net sales, the negative impact of cost of goods sold inflation, unfavorable operating leverage, and higher A&P investment.
Refrigerated & Frozen Segment First Quarter Results
Net sales for the Refrigerated & Frozen segment decreased 2.1% to $1.1 billion in the quarter, reflecting:
a 0.5% decrease from the impact of M&A, and
a 1.6% decrease in organic net sales.
The decrease in organic net sales was driven by a price/mix decrease of 1.5% and a volume decrease of 0.1%.
Operating profit for the segment decreased 9.6% to $102 million in the quarter and adjusted operating profit decreased 13.0% to $100 million as higher productivity was more than offset by lower organic net sales, the negative impact of cost of goods sold inflation, unfavorable operating leverage, and higher A&P investment.
International Segment First Quarter Results
Net sales for the International segment increased 2.7% to $218 million in the quarter reflecting:
a 2.4% increase from the favorable impact of foreign exchange,
a 0.6% decrease from the impact of M&A, and
a 0.9% increase in organic net sales.
The increase in organic net sales was driven by a price/mix increase of 1.6% and a volume decrease of 0.7%.
Operating profit for the segment decreased 7.9% to $34 million in the quarter and adjusted operating profit decreased 8.6% to $34 million as higher organic net sales and higher productivity were more than offset by the negative impact of cost of goods sold inflation, unfavorable foreign exchange rates, and higher A&P investment.
Foodservice Segment First Quarter Results
Net sales for the Foodservice segment increased 3.2% to $273 million in the quarter, reflecting:
a 0.1% decrease from the impact of M&A, and
a 3.3% increase in organic net sales.
The increase in organic net sales was driven by a price/mix increase of 0.8% and a volume increase of 2.5%.
Volumes benefited approximately 150 basis points due to timing of customer orders, which occurred in the third quarter last year.
Operating profit and adjusted operating profit for the segment increased 11.4% to $31 million as higher organic net sales and higher productivity more than offset the negative impact of cost of goods sold inflation.
Cash Flow and Debt Update
7For the first quarter of fiscal 2027, net cash used in operating activities totaled $4 million compared to $121 million generated in the prior year period, driven primarily by lower operating profit and higher litigation payments, net of recoveries.
Capital expenditures were $124 million compared to $147 million in the prior year period.
3These items resulted in free cash flow of ($128) million, a decrease of $102 million compared to the prior year.
Dividends paid were approximately flat to prior year at $168 million.
8The company ended the quarter with net debt of $7.4 billion, representing a $193 million, or 2.5%, reduction in net debt versus the prior year period, resulting in a 3.99x net leverage ratio at the end of the quarter.
Outlook
Outlook
The company is reaffirming its fiscal 2027 guidance, reflecting:Guidance reaffirmed
Organic net sales change of (3)% to (1)% compared to fiscal 2026
Adjusted operating margin between 10.0% and 10.5%
Adjusted EPS between $1.40 and $1.50
Key assumptions incorporated in the above guidance remain unchanged and include:Guidance reaffirmed
Equity earnings contribution of approximately $140 million
Pension income of approximately $25 million
Interest expense of approximately $360 million
Adjusted effective tax rate of approximately 24%
Capital expenditures of approximately $550 million
Free cash flow conversion of greater than 90%
Net leverage ratio at fiscal year end of approximately 4.0x
CONAGRA BRANDS
Results
Discussion of Results and Outlook
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