ConAgra Foods Inc.'s (CAG) fiscal third-quarter earnings fell
6.4% from a prior-year that benefited from the proceeds of divested
businesses, as the company's consumer- and commercial-foods
segments reported lower profits.
The adjusted results beat analysts' expectations, however.
Weaker-than-expected customer responses to promotions and rising
commodity costs have squeezed ConAgra's margins, forcing the maker
of Healthy Choice meals and Reddi-wip to cut its earnings outlook
twice last year. For the latest period, gross margin edged down to
25.3% from 25.7%.
More recently, many consumer product companies have been passing
on to consumers the sustained climb in the cost of raw materials,
cushioning the bottom line. ConAgra has moved to end most of its
promotional discounting, joining other food makers such as Kellogg
Co. (K) and General Mills Inc. (GIS) that have also raised
prices.
"While inflationary pressures continue to build and difficult
conditions persist, we expect our performance to continue to
benefit from pricing actions underway, strong supply chain cost
savings, and other profit-enhancing initiatives," ConAgra Chief
Executive Gary Rodkin said.
For the quarter ended Feb. 27, ConAgra reported a profit of
$214.8 million, or 50 cents a share, down from $229.6 million, or
51 cents a share, a year earlier. Revenue rose 4.1% to $3.15
billion.
Analysts polled by Thomson Reuters had most recently forecast
earnings of 46 cents a share on $3.12 billion in revenue.
Sales in ConAgra's consumer-foods unit, its biggest by revenue,
edged up 2% as operating profit decreased 14% on flat volume.
The smaller commercial-foods segment's sales jumped 7% on higher
prices for milled flour and increased volumes in potato products,
though profit fell 2.8%.
Shares of ConAgra, which affirmed its earnings guidance for the
year, closed Wednesday at $22.93 and were inactive premarket. The
stock is down 12% over the past 12 months.
-By Drew FitzGerald, Dow Jones Newswires; 212-416-2909;
Andrew.FitzGerald@dowjones.com