Conagra trims profit forecast as higher inflation, promotions to dent margins
Annual margin forecast hurt by cocoa, sugar price rise
Price cuts on grocery, snacks, frozen foods prop up volume
Consumers seeking value, prioritizing affordability, CEO says
Shares of the company down 2% in early trade
Adds background in paragraph 3, CEO's prepared remarks in paragraph 5, analyst comment in paragraph 7
By Savyata Mishra
Dec 19 (Reuters) -Conagra Brands CAG.N on Thursday joined rival General Mills GIS.N in trimmingits annual profit forecast and warningthat price cuts on its products across grocery, snacks and frozen food items to spark demand will weigh on margins.
Consumers, wary of higher grocery prices, have turned to cheaper private label brands, hurting sales at packaged food companies including Conagra, Campbell's Co CPB.O, Kraft Heinz KHC.O and JM Smucker SJM.N.
In response, these companies have ramped up promotions on their branded food products this year, introducing smaller pack sizes and increasing advertising to entice shoppers.
Conagra, which typically caters to more budget-strappedcustomers, said volumes improved in the snacking and staples categories such as microwave popcorn, and frozen vegetables on the back of promotions, thought it remains cautious on deep discounting.
"We're still seeing value-seeking behaviors, with consumers prioritizing affordability and maximizing value," CEO Sean Connolly said in prepared remarks.
Conagra expects rising cocoa and sugar prices to pressure its margin and said a stronger dollar would hurt its international segment sales in the back half of the year.
"Company's updated view better reflects the consumer environment but the pivot to ramp merchandising takes a toll on margins," RBC analyst Nik Modi said.
Conagra now expects fiscal year 2025 adjusted profit per share in the range of $2.45 to $2.50, compared with its prior target of between $2.60 and $2.65.
It also lowered its adjusted operating margin forecast to about 14.8%, from a range of 15.6% to 15.8%.
Shares of the Slim Jim beef jerky maker were down 2% in early trade, after having declined about 4% this year.
The company posted a smaller-than-expected drop in second-quarter sales as price cuts across its categories helped prop up demand that has slowed over the last few years.
Net sales came in at $3.20 billion for the three months ended Nov. 24, compared with analysts' average estimate of $3.15 billion, according to data compiled by LSEG.
Reporting by Savyata Mishra in Bengalurul; Editing by Maju Samuel
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