Conagra Brands reports strong third-quarter net sales growth

April 12, 2022

Conagra Brands Inc. reported results for the third quarter of fiscal year 2022, which ended on February 27, 2022.

Highlights include:

  • Third-quarter net sales increased 5.1%; organic net sales increased 6%. On a two-year compounded annualized basis, third-quarter net sales increased 6.8% and organic net sales increased 7.8%.
  • Operating margin decreased 387 basis points to 12.3%; adjusted operating margin decreased 230 basis points to 13.7%.
  • Diluted earnings per share (EPS) for the third quarter decreased 22.4% to $0.45, and adjusted EPS decreased 1.7% to $0.58. On a two-year compounded annualized basis, third-quarter EPS increased 3.5% and adjusted EPS increased 11.1%.
  • The company is updating its fiscal 2022 guidance, and providing fourth-quarter guidance, to reflect expectations for continued top line strength, higher cost of goods sold inflation, and the timing of additional pricing actions.
  • The company's updated fiscal 2022 guidance is as follows:
    • Organic net sales growth is expected to be approximately +4% versus prior guidance of approximately +3%.
    • Gross inflation (input cost inflation before the impacts of hedging and other sourcing benefits) is expected to be approximately 16% versus prior guidance of approximately 14%.
    • Adjusted operating margin is expected to be approximately 14.5% versus prior guidance of approximately 15.5%.
    • Adjusted EPS is expected to be approximately $2.35, versus prior guidance of approximately $2.50.
    • Pro Forma FY22 adjusted diluted EPS is estimated at approximately $2.65, excluding the impact of the FY22 lag between inflation and in-market pricing.
  • The company's fiscal 2022 fourth-quarter guidance is as follows:
    • Organic net sales growth is expected to be approximately +7%.
    • Gross inflation (input cost inflation before the impacts of hedging and other sourcing benefits) is expected to be approximately 16%.
    • Adjusted operating margin is expected to be approximately 15.5%.
    • Adjusted EPS is expected to be approximately $0.64.

Sean Connolly, president and chief executive officer of Conagra Brands, said, "Our business delivered another quarter of strong net sales growth as our brands continued to resonate with consumers. Our focus on strategic innovation and our intentional approach to investment helped us capture share across each of our domains – frozen, snacks, and staples. The team's dedication to executing our Conagra Way playbook has continued to pay dividends in the face of a challenging external landscape."

He continued, "We experienced higher-than-expected cost pressures as the third quarter progressed and expect those pressures to continue into the fourth quarter, particularly in certain frozen, refrigerated, and snacks businesses. In response, we have taken steps to implement additional inflation-driven pricing actions. We will begin to see the benefits of these actions in the first quarter of fiscal 2023. Consumer demand has remained strong in the face of our pricing actions to date, but there will continue to be a lag between the timing of the incremental inflation and the benefits of our mitigating actions."

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