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How Conagra Brands’ Sales Fared in Fiscal Q1 2019

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Sales missed estimate

Conagra Brands (CAG) reported net sales of $1.83 billion in the first quarter of fiscal 2019, a rise of 1.7% YoY (year-over-year) and short of analysts’ consensus estimate of $1.85 billion. Higher prices and a favorable mix added 1.2% to the company’s net sales growth, while its recent acquisitions of Sandwich Bros. of Wisconsin and Angie’s BOOMCHICKAPOP contributed 2.0% to its net sales growth rate.

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However, the company’s sale of its Trenton plant and its Del Monte business in Canada and adverse currency rates remained a drag. Conagra Brands’ organic sales increased 1.2% during the reported quarter driven by higher net price realizations and a mix improvement of 2.1%. However, increased retailer investments partially offset the benefits of higher pricing and mix by 0.9%. The company’s volumes remained flat in the quarter.

Conagra’s peers General Mills (GIS), the J.M. Smucker Company (SJM), the Hershey Company (HSY), and the Kellogg Company (K) have reported improved net sales growth driven by recent acquisitions. However, their organic sales growth rates remain weak. General Mills’ top line increased 8.6% in its first quarter of fiscal 2019 driven by its Blue Buffalo acquisition. However, its organic sales showed marginal growth.

J.M. Smucker’s net sales in its first quarter of fiscal 2019 rose ~9%, benefiting from its Ainsworth acquisition. However, its organic sales remained weak.

Outlook

Conagra has reaffirmed its expectation that its net sales will increase 0.5%–1.5% in fiscal 2019. It expects its organic sales to grow 1.0%–2.0%.

However, the company’s fiscal 2019 second-quarter guidance is disappointing. Its management expects its organic sales to remain flat or decline marginally as the quarter faces a tough YoY comparison. Higher retailer investments are also likely to remain a drag.

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