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(Reuters) -Conagra Brands on Thursday cut organic net sales growth and profit forecasts for fiscal 2024 and warned of a slower recovery in demand for its packaged meals and snacks.
Shares of the Slim Jim beef jerky maker, which fell 26% in 2023, were down about 2% in early trading, after it also missed net sales expectations for the second quarter.
Volumes have been on the decline for packaged food companies, including Conagra and General Mills (NYSE:GIS), as cost-conscious consumers turn to cheaper alternatives and private-label brands.
Conagra is also seeing benefits from price hikes, undertaken last year to offset the impact of supply chain snags, starting to fade.
“We expect sentiment in food to remain poor,” RBC Capital Markets analyst Nik Modi said, adding that lower pricing contribution also impacted margins for Conagra.
The company’s margins fell 261 basis points to 14% in the reported quarter.
Conagra forecasts its annual adjusted earnings per share to be in the range of $2.60 to $2.65 compared with its prior projection of $2.70 to $2.75, and said it expects increased marketing expenses in back half of the year.
Volumes in its grocery and snacks segment, which includes canned meat and Act II popcorn, fell 3.7% in the quarter, while in refrigerated and frozen segment fell 3.3%.
Conagra said it ramped up marketing investment in its frozen foods business to rein in volume declines. Its selling, general and administrative expenses were up nearly 7% in the second quarter.
The company expects annual organic net sales to decrease between 1% and 2%, compared with its earlier forecast of about 1% growth.
Its second-quarter net sales fell 3.2% to $3.21 billion, missing LSEG estimates of $3.24 billion.
