US ready-made food company’s profits to fall well below estimates
Shares of the company, which also posted lower than expected first-quarter results, fell as much as 6% in trading on Thursday.
The company’s products compete in highly competitive categories that are dominated by larger players such as Heinz and Kraft Foods Group Inc. The company also faces competition from lower- priced private label players.
ConAgra said first-quarter sales in its consumer foods business, which sells meals, condiments, snacks and desserts, fell 2% as retailers sought cheaper options in the face of intense competition.
Chief executive Gary Rodkin said the company was taking actions such as investing in products, increasing promotional activity and merchandising to improve sales in the business.
“We currently expect that it will take some time to impact these trends and therefore we expect consumer foods volume and operating profit to be soft through the second quarter,” Rodkin said on a conference call with analysts.
The consumer business, which accounted for about 60% of sales in fiscal year ended May 30, also includes brands such as ACT II popcorn, Slim Jim beef jerky and PAM cooking sprays.
“We have long thought their prospects would be hindered because of their second and third-tier brands and we don’t expect that competitive pressures will abate materially over the near term,” Morningstar analyst Erin Lash told Reuters.
The US company, based in Nebraska, which counts Wal-Mart Stores among its customers, said it expects second-quarter earnings to be about 55c per share. Analysts had expected a profit of 63c (46.5c) per share. Sales in the first quarter rose 27% to $4.20bn (€3.1bn), but missed the average analyst estimate of $4.29bn, according to Thomson Reuters.
