Conagra Brands is set to enact a “robust and multifaceted” investment for the rest of the year to “build momentum” after cutting sales and profits guidance.
During a call with analysts after posting disappointing second-quarter results, president and CEO Sean Connolly spoke about how the investment plan “reflects our confidence in consumer responsiveness to our brand-building efforts”.
The Slim Jim jerky maker will invest undisclosed amounts into advertising, innovation and merchandising, the chief executive stated.
“All of this adds up to a deliberate plan in the second half to smartly invest to build momentum with consumers, set ourselves up for a nice fiscal 2025 and be very responsible in terms of the types of activities we engage in. It’s everything from merchandising to advertising,” Connolly said.
The US manufacturer expects its annual net sales to fall 1-2% on an organic basis, compared to its previous forecast of 1% growth. Conagra now expects its volumes to recover more slowly due to lower consumer demand.
“The goal at this juncture is to build momentum, move the volumes back toward growth as we approach fiscal 2025, and make sure that we deliver along the way without signing up for anything heroic,” Connolly said.
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When asked about the effects of slowly recovering consumer demand, the CEO said that “the macro-environment has challenged volumes for the group a bit longer than expected”.
He added: “We would all like to get back on growth algorithms ASAP but, in the simplest sense, before you can return to volume growth, you have to sunset the volume declines and get them into your base. That’s why we’ve been very focused on tracking volume trends.
“Given the consumer response we saw in Q2, the associated increase in H2 investments and the easier comps we’ve got in H2, we fully expect that the volume declines will further sunset in the second half,” the CEO stated.
Conagra, meanwhile, is forecasting its adjusted operating margin to be around 15.6%, versus its October estimate of 16-16.5%.
The company also lowered its forecast for its annual adjusted earnings per share from a range of $2.70 to $2.75 to $2.60 to $2.65.
Analysts at investment banking firm Stifel wrote in a note yesterday: “We expect shares to be pressured by the reduction in FY24 guidance, weaker organic sales growth in the quarter and pressure on price/mix as the company increases investments.”
Shares in Conagra closed down 1.91% at $28.72.
