ConAgra's Sales Fall, Supporting Plan to Revive Food Brandsby
CEO Connolly is shedding private-label, commercial operations
Revenue from consumer foods segment slips 2.9 percent
ConAgra Foods Inc., the maker of Chef Boyardee pasta and Orville Redenbacher’s popcorn, posted second-quarter sales that trailed analysts’ estimates, reinforcing the need for Chief Executive Officer Sean Connolly to focus on reigniting growth in the company’s household brands.
Connolly, who has faced pressure from activist investor Jana Partners, has begun to transform ConAgra since taking the helm in April. He has announced the sale of ConAgra’s struggling private-label business and the spinoff of Lamb Weston, which accounts for the majority of sales from the company’s commercial-foods unit. The moves will leave Connolly free to try to revive sales of ConAgra’s branded foods, which also include Healthy Choice frozen meals and Swiss Miss cocoa.
- Sales in the period ended Nov. 29 slid 1.4 percent to $3.09 billion. Analysts projected $3.1 billion.
- Revenue from consumer foods fell 2.9 percent to $1.98 billion.
- Commercial-segment sales rose 1.5 percent to $1.11 billion.
- Profit excluding some items was 71 cents a share, beating analysts’ average estimate of 62 cents.
Connolly is seeking to reduce annual costs by $300 million over the next few years to improve the company’s margins. That includes $100 million in savings on trade spending, in part from a reduction in promotions. The shift has weighed on sales in the near term.
“We think that’s the right thing to do for the business,” Connolly said in an interview. “It’s all conscious and deliberate and part of our plan.”
ConAgra said Tuesday in a statement that the $2.7 billion sale of the private-label unit to TreeHouse Foods Inc. is on track and expected to close in the first quarter of calendar 2016. The spinoff of the Lamb Weston, which sells frozen french fries to restaurant chains, is expected to close in the fall of next year.
Connolly has said that the strategy for reviving the branded foods business may include more divestitures or acquisitions.
The shares rose 1.1 percent to close at $41.43 in New York. Omaha, Nebraska-based ConAgra has gained 14 this year.