ConAgra Foods Swings to a Loss on Charges from Private-Label Business -- Update
September 22 2015 - 3:06PM
Dow Jones News
By Annie Gasparro And Lisa Beilfuss
ConAgra Foods Inc. reported a quarterly loss on Tuesday, as the
food maker hunts for a buyer for its struggling private-label
business and invests more in reviving older brands such as Hunt's
tomato sauce and Reddi-wip dessert topping.
The Omaha-based company, also known also for Pam cooking spray
and Chef Boyardee canned pastas, has been battling weak demand for
many traditional U.S. packaged foods that also has sapped sales at
rivals, such as General Mills Inc. and Campbell Soup Co.
Chief Executive Sean Connolly, who took ConAgra's helm in April,
said he is putting more money behind some of
well-known-but-outdated brands such as Marie Callender's pot-pies
and Healthy Choice frozen dinners, which had been relatively
neglected by the company in recent years.
"One thing that happens when companies reduce investments in
brands and in consumer insights is the brands start to atrophy,"
Mr. Connolly said in an interview. "But brands are incredibly
resilient...you can make them relevant to a whole new
generation."
He said Reddi-wip, for instance, has benefited from new
marketing and packaging highlighting that its main ingredient is
"real cream," as opposed to water and hydrogenated vegetable oil
that appear as the two main ingredients in rival Cool Whip.
Not all of ConAgra's stable of brands will get that kind of
attention, though. Others, such as Wesson cooking oil, ConAgra will
keep around for the cash but not as a growth engine. "The key that
I want to emphasize is that you don't treat all brands as if they
are created equal," Mr. Connolly said. "Not all have equal growth
opportunities."
In the latest quarter, sales in ConAgra's consumer business were
flat, though operating profit rose 25% to $242 million, as Mr.
Connolly cuts costs to keep up with rival Kraft Heinz Co., which is
setting a higher bar for profitability among U.S. food
companies.
To that end, he has decided to sell off the company's struggling
private-label business, which makes foods for various store brands,
which it had acquired in late 2012 for $5 billion.
While it looks for a buyer of that unit, ConAgra faces
additional pressure from activist investor Jana Partners LLC, which
as of early July owned a 2.7% stake in the company. In July,
ConAgra struck a deal with Jana to add two members to its
board.
In the latest quarter, ended Aug. 30, ConAgra reclassified its
private-label business as discontinued operations, given the
company's plans to exit the business.
The loss on those operations resulted in an overall quarterly
loss for ConAgra of $1.24 billion, or $2.85 a share, down from a
profit of $482.3 million, or $1.12 a share, a year earlier.
Stripping out the loss from discontinued operations and other
one-time items, per-share profit rose to 45 cents from 39 cents.
Revenue edged up 1.1% to $2.79 billion.
In the commercial unit, which includes sales of Lamb Weston
frozen potatoes to restaurants, revenue rose 3.5% operating profit
grew 17% to $139 million.
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(END) Dow Jones Newswires
September 22, 2015 14:51 ET (18:51 GMT)
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