Conagra Manufacturers’ (NYSE: CAG) inventory has dropped 9% over the previous three months. The corporate has been going through a difficult surroundings, which led to a decline in gross sales and earnings throughout its most up-to-date quarter. The branded meals maker additionally lowered its steerage for the fiscal yr because it anticipates headwinds from inflation. On the identical time, Conagra’s brand-building investments have helped drive robust share positive factors.
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% destructive impression from value/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 client surroundings
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. In opposition to this backdrop, many producers are growing their investments in promoting and promotions. Conagra’s technique has been to put money into constructing its manufacturers somewhat than depend on promotions to drive quantity, and this transfer is paying off.
The corporate’s brand-building investments have helped drive robust 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 throughout the quarter.
Conagra noticed robust frozen consumption in Q2, helped by quantity share positive factors 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 sizzling chocolate. Excluding Swiss Miss, snacks quantity rose 0.6% in Q2. CAG can also be seeing encouraging quantity tendencies in its staples class, together with robust efficiency in its chili enterprise.
Outlook
Conagra expects its enterprise to face pressures from increased than anticipated inflation and unfavorable international alternate charges within the second half of fiscal yr 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 yr versus the primary half.
Primarily based on these components, CAG up to date its steerage for fiscal yr 2025. It now expects natural gross sales progress for the complete yr to be close to the midpoint of its steerage 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 yr. Adjusted EPS is now anticipated to vary between $2.45-2.50 versus the prior outlook of $2.60-2.65.