Connolly reported the company’s adjusted EPS for the quarter exceeded expectations and was up nearly 18% from the prior year.
Conagra’s Q1 net sales were down 4.8%, and organic net sales were down 3%, mainly driven by volume declines in its grocery and snacks, international and foodservice sectors.
However, the results were partially offset by volume increases in the refrigerated and frozen segment due to new product introductions.
Premium snack acquisitions contribute growth
David Marberger, Conagra’s executive VP and CFO, said: “The acquisitions of Frontera, Duke’s and BIGS added 3.6 percentage points to the reported net sales growth rate.”
Total organic net sales of the grocery and snacks segment, however, were down 5.1%, driven by a volume decline of 5.9%, said Marberger.
Conagra recently acquired Angie’s popcorn brand Boomchickapop for $250m to refresh its popcorn portfolio.
“Angie’s [popcorn] is on track to generate approximately $100m in sales by the end of calendar year 2017 [the expected transaction closing date],” said Connolly.
He noted Conagra would acquire both small premium brands and large companies in the future as long as they can be accretive to company sales.
“We'll stay active in our pursuit of value-enhancing M&A, and we will be relentless about doing what's necessary to deliver our long-term algorithm,” said Connolly.
Grocery and snacks segment
Conagra’s overall grocery and snacks segment reported a 1.5% sales decline during Q1, despite growth contributions from its recent acquisitions.
According to Marberger, the segment discontinued low-performing SKUs by not repeating discount merchandizing events on a handful of center-store brands.
As a result, the company reported the segment’s declining sales “abated materially” as the quarter progressed, and momentum is expected to continue in the second quarter.
Conversely, Conagra’s refrigerated and frozen segment posted a 1.3% sales increase due to strong growth among brands such as Marie Callender’s and Healthy Choice, as well as productivity gain in its supply chain.
Regarding its snack business, Connolly said Conagra manages its total portfolio as a single cohort.
“There are growth pockets in our snacks business… there are also plenty of reliable contributors in that grocery business that are very high margin, high cash flow,” he said. “We have not renovated [or] modernized them yet… We’ll do that.”
Conagra anticipated its organic net sales to drop by 2% to flat in fiscal 2018.