Conagra Manufacturers’ (NYSE: CAG) inventory has dropped 9% over the previous three months. The corporate has been going through a difficult setting, which led to a decline in gross sales and earnings throughout its most up-to-date quarter. The branded meals maker additionally lowered its steering for the fiscal 12 months because it anticipates headwinds from inflation. On the identical time, Conagra’s brand-building investments have helped drive sturdy share good points.
Q2 efficiency
Conagra’s web gross sales dipped 0.4% year-over-year to $3.2 billion within the second quarter of 2025. Natural gross sales inched up 0.3%, reflecting a 0.4% progress in quantity and a 0.1% detrimental impression from worth/combine. Adjusted earnings per share fell 1.4% YoY to $0.70 in Q2. Adjusted gross margin decreased 52 foundation factors to 26.4%.
Navigating a dynamic shopper setting
As talked about on the Q2 earnings name, customers are going through financial pressures which has led to them prioritizing affordability and in search of most worth on their purchases. Towards this backdrop, many producers are rising their investments in promoting and promotions. Conagra’s technique has been to spend money on constructing its manufacturers slightly than depend on promotions to drive quantity, and this transfer is paying off.
The corporate’s brand-building investments have helped drive sturdy market share efficiency and quantity restoration. In Q2, 67% of CAG’s portfolio held or gained quantity share. Within the frozen and snacks classes, 87% of the portfolio held or gained quantity share through the quarter.
Conagra noticed sturdy frozen consumption in Q2, helped by quantity share good points in single-serve meal manufacturers, multi-serve meal manufacturers, and Birds Eye Greens. The corporate is seeing good efficiency inside its snacking portfolio, though excessive cocoa costs contributed to a decline in Swiss Miss scorching chocolate. Excluding Swiss Miss, snacks quantity rose 0.6% in Q2. CAG can be seeing encouraging quantity traits in its staples class, together with sturdy efficiency in its chili enterprise.
Outlook
Conagra expects its enterprise to face pressures from greater than anticipated inflation and unfavorable overseas change charges within the second half of fiscal 12 months 2025. The corporate plans on taking restricted pricing actions late within the third quarter of 2025 to offset some inflation in cocoa and sugar, and it expects volumes and natural gross sales to enhance within the second half of the 12 months versus the primary half.
Based mostly on these elements, CAG up to date its steering for fiscal 12 months 2025. It now expects natural gross sales progress for the total 12 months to be close to the midpoint of its steering vary of down 1.5% to flat versus FY2024.
Adjusted working margin is now anticipated to be approx. 14.8% versus the earlier vary of 15.6-15.8%, as inflation is now anticipated to be nearer to 4% versus the sooner expectation of round 3%. Adjusted gross margin is predicted to contract by approx. 90 foundation factors versus final 12 months. Adjusted EPS is now anticipated to vary between $2.45-2.50 versus the prior outlook of $2.60-2.65.
