Conagra Brands' Q3 net sales increase 8.5%, foodservice segment continues to lag

Conagra Brands Inc. (NYSE: CAG) reported results for the third quarter of fiscal year 2021, which ended on Feb. 28, 2021. At a glance, Conagra reported a strong quarter:

• Third-quarter net sales increased 8.5%; organic net sales increased 9.7%, which is above the company's guidance range.
• Operating margin increased 193 basis points to 16.2%; adjusted operating margin increased 31 basis points to 16%, which is in line with the company's guidance range.
• Diluted earnings per share from continuing operations (EPS) for the third quarter grew 38.1% to $0.58, and adjusted EPS grew 25.5% to $0.59, which is in line with the company's guidance range.
• During the third quarter, Conagra repurchased approximately 8.8 million shares of its common stock for $298 million.

Conagra also provided guidance for its fiscal fourth quarter:

• Organic net sales growth is expected in the range of (10)% to (12)%.
• Adjusted operating margin is expected in the range of 14% to 15%.
• Adjusted EPS is expected in the range of $0.49 to $0.55.

"We remain confident that each of our retail domains – frozen, snacks, and staples – is well-positioned to sustain the benefits of the eat-at-home habits consumers have developed during the COVID-19 pandemic," said Conagra president and chief executive Sean Connolly. "Our continued business momentum, coupled with our disciplined approach to investment, reinforce our confidence in the long-term potential of the business and our ability to create sustained value for our shareholders. We further demonstrated this confidence by repurchasing nearly $300 million of our common stock this quarter, which came after we raised our quarterly dividend 29% earlier this fiscal year."

Conagra's foodservice segment continued to struggle with the negative impact of COVID-19. Net sales for the foodservice segment decreased 17.2% to $194 million in the quarter reflecting a 0.7% decrease from the impact of the sold businesses and a 16.5% decrease in organic net sales.

On an organic net sales basis, volume decreased 19.5% primarily driven by lower restaurant traffic as a result of the COVID-19 pandemic. Price/mix was favorable at 3.0% in the quarter primarily driven by increased pricing to offset higher input costs.

Click here to see Conagra Brands' full third-quarter news release.