For the second quarter in a row, Conagra Brands missed analyst expectations with an EPS of 56 cents compared to a forecast 59 cents and revenue of $2.78 billion compared to an anticipated $2.85 billion. The drop reflects a net sales decrease of 3.6% for the full fiscal year and triggered a sharp decline in its stock, which tumbled 7.75% in pre-market trading July 10 following the company’s same day announcement.
The intensity of the decline is magnified by the steady gains Conagra earned in the first half of the year, including more than $300 million in retail sales from innovations, which represents a 27% increase in dollar growth from launches in fiscal 2025 compared to fiscal 2024. This helped the company return to domestic retail volume growth in the second quarter after positively climbing for five consecutive quarters.
CEO Sean Connolly attributed the company’s reversal of fate to four factors that are causing consternation across the CPG industry: inflation, foreign exchange headwinds, supply challenges across two product platforms and weakening consumer sentiment.
Tariffs aggravate stubborn inflation and complicate foreign exchange
While Conagra leadership initially expected some relief from inflation in the second half of the fiscal year, Connolly noted flatly that “it actually worsened” just as foreign exchange headwinds emerged, which attributed in part to tariffs.
“Our cost of goods sold inflation rate actualized at 4% during the second half, well above the sub-3% levels we expected,” he said, adding it was “most challenging within certain proteins, like beef, chicken and eggs.”
He said he expects inflation for core cost of goods to about 4% in the coming fiscal year, which will bring the 5-year cumulative net inflation to about 45% – “a historic amount of inflation over such a short period of time.”
He said he also expects the current tariff environment to add about 3% to Conagra’s cost of good sold, which is more than $200 million annually, which would bring the total anticipated inflation for next year to about 7%.
The company’s canned food products have “the largest tariff exposure as steel and aluminum tariffs significantly increased the cost to procure tin plate steel as domestic supply is very limited,” CFO David Marberger noted.
While the Trump administration recently extended the pause of country-specific “liberation tariffs” to give trading partners more time to negotiate deals, the 10% across-the-board tariff is taking a toll on the economy as many companies raise prices to offset higher costs and consumers pull back on spending.
“The cumulative impact of inflation and economic uncertainty has led to value-seeking behaviors becoming even more pronounced,” said Connolly, noting the consumer sentiment index from the University of Michigan fell from 79 in January 2024 to 52.2 at the start of May 2025.
He added that “while our brands are well-positioned to deliver value and meet” consumers’ shifting needs, “the environment created additional pressure on volumes.”
‘Discrete’ supply challenges limited Conagra’s ability to meet demand
The back half of the year was also marked by “discrete supply challenges” within Conagra’s frozen vegetables and meals containing chicken, Connolly said.
“Supply constraints limited our ability to meet demand, resulting in lost sales, particularly during the third quarter,” he explained. “However,” he added, “service levels rebounded in Q4 to exit the year close to our target.”
The company is reinforcing its supply chain resiliency to avoid a similar bottleneck and to support growth “well into the future,” Connolly said.
“This includes previously planned investments to modernize our facilities as well as new investments to expand capacity in high-growth categories,” such as baked chicken and fried chicken, he said.
“Chicken has been the fastest growing protein and fried chicken, in particular, has proven to be a consumer favorite, mirroring what we’ve seen in foodservice QSRs in recent years,” he said. “This new investment will better support innovations like Banquet Mega Filets, which was a huge hit in fiscal 2025, and Marie Callender’s Fried Chicken Bowls, another consumer favorite.”
Conagra focuses on ‘long-term value creation’
Given the threat of tariffs and ongoing inflation are unlikely to ease in the near future, Conagra’s executive team is focused on “driving long-term value creation,” said Connolly.
This includes a focus on driving volume growth in its frozen and snack domains, “even if it means investing margin in the short term,” he said.
In addition, he said, modernizing facilities and increasing supply chain resiliency to deliver products consumers want should have long term benefits.
Finally, the company is exploring different approaches to canned goods to address the impact of tariffs, including alternative sourcing, cost savings initiatives and targeted price adjustments, he said.
The company also will continue to invest in innovation, adding incremental merchandising and boosting marketing for brands as it did in 2025, he said.
