Slim Jim Maker Conagra’s Shares Dip Amid Sales Miss and Volume Decline

Summary

  • In premarket trading, Slim Jim beef jerky maker’s shares took a hit, falling approximately 3% after a 26% downfall in 2023.
  • Conagra, the company, has struggled with decreasing volumes in its ready-to-eat meals and frozen snacks categories due to budget-conscious consumers shifting to cheaper brands amidst inflation.
  • The grocery and snacks sector, which comprises canned meat and Act II popcorn, stumbled by 3.7%, and the refrigerated and frozen segment also faced a 3.3% drop.
  • Despite the initial benefits from their price hikes to counter supply chain issues, Conagra is now grappling with their fading impact.
  • Operating margin for the period up until November 26 fell 261 basis points to 14%.
  • The company anticipates a reduction in annual organic net sales between 1% and 2%, a notable contrast to its previous projection of almost 1% growth.

Conagra Shares Decline

Following a significant 26% dip in 2023, shares of beef jerky company, Slim Jim, further decreased around 3% in premarket trading. This comes in the wake of short-reaching the net sales estimations for Q2.

Reduction in Sales Volumes

Conagra, known for its ready-to-eat meals and frozen snacks, has witnessed a sales dip in these categories. Budget-minded buyers are opting for more affordable brands amidst an inflationary climate, thereby impacting Conagra’s sales volume.

Sector-Wise Sales Degradation

The grocery and snacks segment of the company, inclusive of canned meat and Act II popcorn, experienced a 3.7% slump in the quarter. Additionally, the refrigerated and frozen sector saw a fall of 3.3%.

Impact of Price Hikes on Conagra

Previously, Conagra adopted price hikes as a measure to balance the hit from supply chain complications. However, it is now witnessing the diminishing benefits from this approach.

Operating Margin Takes a Hit

The operating margin for Conagra sank 261 basis points, ending up at 14% for the quarter concluding on November 26.

Future Projections

Conagra is now expecting its yearly adjusted earnings per share to fall within the $2.60 to $2.65 range, a downward adjustment from its previous prediction of $2.70 to $2.75. The company is gearing up for increased marketing expenses for the latter half of the year.

Competition From Private Labels

Conagra and other packaged food companies such as General Mills (NYSE:) are losing shelf space to more affordable, private label brands as consumers are aiming to make their budgets stretch further.

Organic Net Sales Projection

Conagra is now predicting an annual organic net sales fall ranging between 1% and 2%, a stark contrast to its prior estimate of nearly 1% growth. The company reported a net sales drop of 3.2% to $3.21 billion for Q2, falling short of LSEG’s expected $3.24 billion.

These financial shifts could potentially influence the trading patterns, specifically in the forex market, considering Conagra’s status in the food industry and the expected rippling impact of its financial performance on related assets.

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