Conagra Brands (NYSE:CAG) reported a first-quarter fiscal 2027 organic net sales decline of 1.1%, while adjusted profit measures came in ahead of the company’s expectations. The maker of frozen meals, snacks and grocery staples reaffirmed its full-year outlook as it works through consumer spending pressure, elevated input costs and planned pricing actions.
Chief Executive Officer John Brase said the company delivered “a solid start to the fiscal year despite a challenging operating environment.” Organic net sales totaled about $2.6 billion in the quarter, while adjusted gross margin was 23.8%, adjusted operating margin was 11.5% and adjusted earnings per share were $0.41.
Sales trends varied across portfolio
Conagra’s volumes declined 2.1% in the quarter, while price mix increased 1%. Total company dollar consumption fell about 0.6%, which Brase said was roughly one percentage point better than domestic shipment performance.
In frozen foods, dollar consumption declined 0.7% and volume fell 0.5%. Birds Eye vegetables and Healthy Choice single-serve meals posted dollar-consumption growth of 7% and 8%, respectively. Brase said the gains were offset by weakness in brands including Marie Callender’s and P.F. Chang’s.
The company also chose not to repeat certain merchandising events for Sandwich Brothers, a decision that created sales pressure but improved profitability, according to Brase.
Snack dollar consumption was approximately flat despite a 3.9% volume decline. Meat snacks grew, offsetting pressure in the convenience-store channel. Brase said FATTY produced strong growth, while Slim Jim remains a near-term focus for increased merchandising and marketing investment. Popcorn continued to face broader category softness.
Within staples, Conagra saw consumption trends improve sequentially as the effects of its prior strategic pricing actions moderated. Tomatoes, chili and pickles grew, while whipped toppings and salad dressings declined.
- Grocery and snacks organic sales fell 2%, with volume down 5.4% and price mix up 3.4%.
- Refrigerated and frozen organic sales declined 1.6%, with roughly flat volumes and negative price mix driven primarily by unfavorable mix.
- International organic sales rose 0.9%, supported by global markets.
- Foodservice organic sales increased 3.3%, its fifth consecutive quarter of organic growth.
Foodservice volume rose 2.5%, though Marberger said approximately 150 basis points of that growth reflected accelerated timing of certain customer orders.
Margin initiatives and portfolio simplification
Adjusted operating margin declined 33 basis points from the prior year to 11.5%, though it exceeded the company’s expectations for a high-single-digit margin. Price mix added 130 basis points to margin, as inflation-justified pricing actions more than offset increased merchandising investment.
Inflation, including core inflation and tariff-related effects, was about 5% during the quarter. Marberger said protein costs were more favorable than expected, but fuel and logistics costs accelerated during the period and are expected to weigh on the second quarter and the rest of the fiscal year.
Conagra expects strategic inflation-justified pricing to begin affecting results around the middle of the second quarter. Its productivity pipeline remains on track to deliver more than 4% for the full year, Brase said.
The company increased advertising and promotion investment by 15% in the first quarter. Brase said the spending generated about four times the media impressions of the prior-year period and improved media productivity by 35%. The investment supported campaigns for Healthy Choice, Banquet and Slim Jim.
Conagra is also simplifying its portfolio and operations. The company exited the Celeste frozen pizza business, which created a modest 15-basis-point net-sales headwind in the first quarter. Brase said the decision is expected to be margin accretive going forward.
The company has launched a broader review of its SKU portfolio and is evaluating strategic options for certain non-core businesses. Brase said most benefits from complexity reduction are expected over the next 12 to 18 months, reflecting the need to coordinate with customer reset cycles and supply-chain operations.
Guidance reaffirmed amid higher expected costs
Conagra reaffirmed its fiscal 2027 guidance, including an expected organic net sales decline of 1% to 3%, adjusted operating margin of 10% to 10.5%, and adjusted EPS of $1.40 to $1.50.
The company continues to expect mid-single-digit volume declines for the full year, including greater-than-historical elasticity effects in frozen foods from its pricing actions. It plans to raise advertising and promotion spending to about 3% of net sales.
Marberger said full-year inflation is now expected to trend toward the higher end of Conagra’s 5% to 6% range, driven by logistics, fuel, packaging and edible-oil costs. The outlook includes more than 4% productivity savings as a percentage of cost of goods sold.
For the second quarter, Conagra expects organic net sales to decline about 2% and adjusted operating margin to be in the high single digits. The company expects inflation to increase from first-quarter levels, while it also accelerates advertising investment and absorbs SG&A expenses that benefited from timing in the first quarter.
Conagra ended the quarter with a net leverage ratio of 3.99 times and reduced net debt by nearly $200 million from the first quarter of fiscal 2026. The company said it remains on track to end the fiscal year at approximately 4 times net leverage.
About Conagra Brands (NYSE:CAG)
Conagra Brands, Inc is a packaged food company headquartered in Chicago, Illinois. The company develops, produces and markets branded food products sold through grocery stores, mass merchandisers, club stores, convenience stores, foodservice operators and e-commerce channels.
Its portfolio includes frozen, refrigerated, grocery and snack products. Well-known brands include Birds Eye, Healthy Choice, Marie Callender’s, Banquet, Duncan Hines, Reddi-wip, Slim Jim, Hunt’s, Chef Boyardee, Orville Redenbacher’s, Vlasic, PAM and Angie’s BOOMCHICKAPOP.
