(Corrects to drop reference to Duke’s mayonnaise maker in paragraph 11)
By Anuja Bharat Mistry
(Reuters) -Conagra reported first-quarter results that missed Wall Street estimates as budget-conscious consumers prioritized spending on lower-priced alternatives over the company’s higher-priced pantry staples, sending its shares down about 7%.
Like other U.S. packaged food companies, Conagra has seen demand take a hit from prior price hikes on its frozen meals and Slim Jim beef jerky, with shoppers opting for cheaper private label brands.
The company’s total organic sales volumes fell 1.6% in the first quarter after decreasing 1.8% in the fourth quarter.
Volumes at Conagra’s grocery and snacks unit, which accounts for most of the company’s revenue, fell 1.8%, while its foodservice segment volumes dropped 11.1%.
“Drastic changes in consumer shopping habits seen in the past few years are likely to be more permanent than previously thought,” eMarketer analyst Blake Droesch said.
“Companies such as Conagra will need to innovate to meet the demands of the modern consumer.”
The company reaffirmed its annual forecasts on Wednesday and said it anticipates a challenging consumer backdrop in fiscal 2025.
Temporary manufacturing disruptions during the quarter in the company’s Hebrew National hot dog business resulted in a $27 million hit to its first-quarter results, Conagra said.
The company’s first-quarter net sales fell 3.8% to $2.79 billion. The average analyst expectation was $2.84 billion, according to data compiled by LSEG.
On an adjusted basis, Conagra earned 53 cents per share, missing estimates of 60 cents.
The company’s quarterly gross margin fell 189 basis points to 26.5%.
Last month, peer General Mills (NYSE:) reported a smaller-than-expected drop in quarterly sales, benefiting from improved demand as the Cheerios maker cut prices for some of its products.