Conagra Spends to Boost Sales -- 3rd Update

By Heather Haddon 

Conagra Brands Inc. said spending on promotions and improvements to its products lifted sales in the latest quarter, underscoring a gap between food makers that have invested in improving their appeal to customers and others that have lagged behind.

The Chicago-based conglomerate's strong earnings on Thursday came after General Mills Inc. said earlier this week that spending to update its packaged-food business had shown encouraging signs of lifting sales . Kraft Heinz Co., by contrast, said last month that cost cuts and tepid investments had hurt some of its brands, and wrote down their value by $15.4 billion.

"We cannot and will not cut our way to prosperity," Conagra's Chief Executive Sean Connolly told investors Thursday.

Shares rose more than 10% in morning trading Thursday.

The maker of Healthy Choice frozen dinners and Peter Pan peanut butter said sales rose to $2.71 billion in the quarter ended Feb. 24 from $1.99 billion a year earlier. The growth was driven largely by acquisitions, including its purchase last year of Pinnacle Foods. Analysts had predicted $2.75 billion, according to FactSet.

Sales from snacks and the company's large refrigerated and frozen food business grew during its fiscal third quarter as well, the company said. Conagra reported an adjusted profit of 51 cents a share for the most recent quarter, more than the 49 cents a share analysts expected.

Conagra said it spent on promotions at retailers to bolster sales. Kraft, under its 3G Capital LLC backers, had pulled back on supermarket promotions to cut costs.

Conagra has sought to stand out from its competitors by focusing on frozen meals and vegetables, as consumers seeking convenience have returned to that section of the supermarket. The approach motivated Conagra's acquisition last year of Pinnacle, the maker of Birds Eye vegetables and Hungry Man dinners.

But Conagra's growth in frozen foods has shown signs of slowing. Frozen entree sales in the month ended on Feb. 23 were down for the first time in nearly two years, according to Bernstein.

Mr. Connolly said in an interview that overall momentum in frozen foods remains strong. "Our company has driven virtually all of the growth in frozen meals," he said.

Conagra said it was stopping shipments of some Pinnacle products that were unlikely to sell. The company said Thursday it was focused on improving Birds Eye and other Pinnacle brands.

"We have dug into what exactly ails each brand," Mr. Connolly said about Pinnacle's Duncan Hines, Wish-Bone and Birds Eye brands.

Conagra has made a number of acquisitions in recent years, including Angie's Boomchickapop popcorn, that have added to its debt. The company said that it had reduced its debt by $435 million in the third quarter.

Like General Mills, Campbell Soup Co. and Kraft Heinz, the company has looked to sell some of its weaker brands. Conagra completed the sale of the Wesson oil brand during the latest quarter. Mr. Connolly said the company remains open to selling more brands, but doesn't need to immediately to reduce debt.

The food maker reported a profit of $242 million, or 50 cents a share, compared with $362.8 million, or 90 cents a share in the comparable period, when the company recorded a tax benefit that wasn't repeated.

For the full-year, Conagra said sales in its legacy packaged-food business would be on the lower end of its guidance at roughly 1% growth.

Micah Maidenberg contributed to this article.

Write to Heather Haddon at [e-mail]

(END) Dow Jones Newswires

March 21, 2019 12:19 ET (16:19 GMT)

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