Conagra is reporting strong performance in its frozen and refrigerated products, as well as big growth in advertising and promotional spending for Q2.
Second quarter net sales for the maker of Duncan Hines, Hunts, Gardein and Slim Jim spiked 8.3%, while organic net sales increased 8.6%, topping analyst expectations.
Gross profit increased 22.2% in the quarter and adjusted gross profit increased 21.7%, which was also in part thanks to “inflation-justified pricing action,” Conagra says.
Selling, general and administrative expense (SG&A), which includes advertising and promotional expenses, increased 7.9% to $373 million USD in the quarter. Advertising and promotion alone increased 10.3% to $79 million USD, driven primarily by increased investment in “modern marketing,” including social and digital platforms.
The company is also raising its fiscal 2023 guidance to reflect organic net sales growth of 7% to 8% compared to fiscal 2022.
Reported and organic net sales for the Refrigerated & Frozen segment spiked 10.5% in the quarter, which ended Nov. 30. The company reports it gained share in categories such as frozen single serve meals, plant-based protein and frozen breakfast.
Reported and organic net sales for the Grocery & Snacks segment increased 6.8%, with the company noting it gained share in meat snacks and microwave popcorn, as well as staple categories like canned meat.
Reported and organic net sales for the foodservice segment increased 14.8% in the quarter, while the company’s international business saw a slight decline of 1.3%.
In this morning’s earnings call, Sean Connolly, president and CEO of Conagra Brands, says it maintained total company number share. Conagra ranked second in dollar sales growth against competitors like Smucker and Campbell, he says.
Connolly says consumer demand was strong and durable, especially in frozen and snacking, even in an inflationary environment.
Breakfast sausages and single serve meals experienced double digit retail sales growth compared with last year. With snacks, Conagra drove a 14% increase in retail sales and a 41% increase over fiscal 2020. Snacking momentum is broad-based, Connolly says, with microwave popcorn continuing to show strong growth. Pickles and whipped toppings helped boost its grocery portfolio, too.
Conagra made “good headway” on supply chain initiatives, though conceded it has not been fully normalized.