Conagra Brands Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ken Goldman - JPMorgan - Analyst : I wanted to ask two questions. First, your commentary or your tone on snacking is certainly better than what we're seeing and hearing from a lot of other snack makers, really almost all other snack makers out there right now. What are you seeing? Obviously, you have a little more of a protein bent in your snacking business. But even your popcorn business, the tone was positive on, and most popcorn brands that we see are not doing great. So just trying to get a sense of sort of is it execution? Is it the portfolio? What are you seeing out there that's giving you that advantage right now?

Question: Ken Goldman - JPMorgan - Analyst : Okay, thank you. And then quickly on frozen food, there's a lot of comments being made in the industry about scratch cooking and how that's picking up because -- partly because of the cost of eating away from home. I understand that. But what are your data showing about frozen food? It would seem to me that scratch cooking costs more than a frozen dinner. So do your data show a pick-up or a significant pick-up in consumers really shifting from restaurants over the last few months? Is that an accelerating trend? I know, Sean, you thought it would happen. I just don't know quite how much you're actually seeing in the data.

Question: Andrew Lazar - Barclays Capital Inc. - Analyst : So it's clear Conagra has made obviously very good progress on large parts of the portfolio, most notably frozen and snack domains. But this progress has maybe too often been clouded by various other parts of the portfolio, like maybe a little bit of a leaky bucket at times. And some of those businesses, I think, would seem to be -- at least appear to be less core at least from the outside. And interesting, each business plays a different role within your portfolio. But maybe in light of your much more, it sounded to me, pointed remarks in today's prepared commentary around getting back to portfolio reshaping, I guess, I'm curious if we should take this to mean maybe now there's a greater appreciation to the benefits of portfolio reshaping, like even if it comes with maybe some near-term earnings dilution but longer-term growth and value creation. If I'm not mistaken, you definitely made more of a direct point, I thought, in today's prepared remarks than I've seen in the past. Thank you.

Question: Andrew Lazar - Barclays Capital Inc. - Analyst : Thank you. And then a quick follow-up. Obviously, even if we take out the Hebrew National disruption, organic for the quarter maybe came in, I guess, a little bit -- I mean, it was sequentially improved as you thought it would be but still maybe not quite where maybe you'd hoped it had been or where Street estimates were. It sounds like 2Q also, right, it's some gradual sequential improvement but still a greater amount of reinvestment. So it seems like more of the pressure than even maybe you might have thought at the start of the year is going to be in the second half. I guess, what gives you the confidence or the visibility that the full-year reiteration is the right approach given it seems more second half-weighted, but maybe I'm seeing that not in the right way? Thanks so much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 02, 2024 / 1:30PM, CAG.N - Q1 2025 Conagra Brands Inc Earnings Call

Question: Alexia Howard - Bernstein Institutional Services LLC - Analyst : So two questions. The first one is just about where price/mix goes from here now that we're lapping the tomato product price increase, especially as I think you commented that the trade spend investments are going to be higher next quarter? Then I have a follow-up. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 02, 2024 / 1:30PM, CAG.N - Q1 2025 Conagra Brands Inc Earnings Call

Question: Alexia Howard - Bernstein Institutional Services LLC - Analyst : Got it. And then as a follow-up, more of a sort of taking a step back question. For a number of years, you've been focusing less on advertising and promotion within the SG&A line and maybe a little bit more on promotional, though I recognize that today you laid out that promotional spending is still pretty rational. I think in fiscal '24, your advertising spend was at about 2.5% of sales, 2.4%, which seems lower than the peer average. Is there -- the share trends are looking good, but is the category growth being affected by some of that pullback particularly in light of the fairly significant pullback that you saw this quarter?

Question: Leah Jordan - Goldman Sachs & Company, Inc. - Analyst : I just wanted to follow up on the snacking discussion. Great to see the share gains you called out in that category broadly. But meat stick is a notable one missing, and you noted it's a high-growth category. Maybe you could comment on how you see the competitive environment there, the positioning of Slim Jim today and any potential outlook for more distribution opportunities, and more color on how the new FATTY edition plays into all of that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 02, 2024 / 1:30PM, CAG.N - Q1 2025 Conagra Brands Inc Earnings Call

Question: Leah Jordan - Goldman Sachs & Company, Inc. - Analyst : Great. Thank you. And then for my follow-up, also in the prepared remarks, you said you expect the consumer to remain challenged. Have you seen any shifts in behavior across your brands given the wide portfolio? And then just given this assumption that they remain challenged, I guess, why should promotional activity not revert back further to historical norms given they're still below 2019 levels? Are they responding to promotional activity differently anyway in the current environment?

Question: Nik Modi - RBC Capital Markets - Analyst : Sean, wondering if you could just opine on all the noise between the out-of-home and in-home, like you have obviously restaurant traffic has been weak. We've seen a lot of the foodservice businesses that many consumer companies have struggled over the past few months and quarters. But then you also have these very sharp price points at some of the QSRs and value meals, and I have to assume that there's some interplay. So I would just love your observations on what you guys are seeing from that standpoint from a consumer behavior perspective.

Question: Nik Modi - RBC Capital Markets - Analyst : And maybe if I can ask the other question just on the input costs and anything that you would highlight in terms of things that are moving in the right or wrong direction, just to give us a state of the union there would be helpful.

Question: Peter Galbo - BofA Global Research - Analyst : Dave, thanks for the detail on the beef cycle, always a fun topic. I maybe just wanted to make a clarification on Hebrew National. Just given the seasonality in that business, and then Sean, I think in your comments, it shouldn't be that we expect really a meaningful rebound now that it's behind you in the rest of the year. It's kind of -- we have to wait more until grilling season of next year. And I think you had a similar issue with fish sticks a few years ago, so maybe you can just clarify that.

Question: Peter Galbo - BofA Global Research - Analyst : Okay. Thanks, Sean, for that. And then maybe, Sean, you spent some time talking about snacking and Slim Jim is obviously a pretty important product in the convenience store channel. There's been a lot of debate, I think, amongst investors just around the cyclical versus structural nature of convenience store traffic declines. So just curious, anything you're hearing from the demand science team or just views there on how you're thinking about that channel specifically within snacking. Thanks very much.

Question: Rob Moskow - TD Cowen - Analyst : Dave, I was wondering if you could help us in refrigerated/frozen just how to think about price mix going forward. Have you fully lapped the price rollbacks that you -- I think you had last year in frozen entrees and maybe some other categories. And therefore, does that level off? And then also, was there more deflation pass-through in margarine, I guess? Do we -- are you still living with that for the next few quarters? And then a quick follow-up.

Question: Rob Moskow - TD Cowen - Analyst : Is there like a deflation pass-through just on like commodity-related oils in this division, like for margarine, for example?

Question: Rob Moskow - TD Cowen - Analyst : Okay. So that continues for the rest of the -- that continues for the year unless there's a change in the underlying commodity.

Question: Rob Moskow - TD Cowen - Analyst : You're wrapping on that, too. Okay, okay. And then a follow-up. There's a discrepancy, I think, between the IRI data and the Nielsen data on your meat snacks sales. Your presentation today says things look pretty strong. Nielsen is a little different. Like is this a -- do you think that this data -- is your meat snacks business up year over year in the quarter overall in retail and in your shipments?

Question: Rob Moskow - TD Cowen - Analyst : Okay. What about dollars though, David, is that up as well? Or is that down a little?

Question: Thomas Palmer - Citi - Analyst : You noted the higher lifts from items on promotion. And I guess, ultimately, a portion of the percentage of sales on promo are driven by consumer decisions and not just what's on shelf. I was wondering about the frequency of promotions on shelf. Relative to pre-pandemic levels, do you think that's back to full levels? Or do you think maybe we'll see some changes there still to come?

Question: Thomas Palmer - Citi - Analyst : And a quick one on Ardent. It was a bit light of the implied run rate for the year. I know there can be fluctuations, but this was the lowest in almost three years. Just any kind of thoughts on when we might see the rebound in that business and if there was anything notable to think about in 1Q that maybe drove the slight downside.

Question: Max Gumport - BNP Paribas Securities Corp. - Analyst : With regard to the expectation for volumes to improve through the year, is that really a category dynamic or is it a market share expectation?

Question: Max Gumport - BNP Paribas Securities Corp. - Analyst : Great. Yeah. And on that market share, you're right. I mean, it does look quite impressive. I think that was a highlight for the quarter. And I'm curious what you think the key drivers are for the outperformance on a volume basis? And then do you think there's any help you're getting on volume market share because you perhaps invested in price first? It feels maybe similar to what you were talking about a couple of years ago but also taking price first and lapping that price increase first. I just wonder if you're still ahead of your competitors in that cycle. Thanks very much.