Conagra Brands Inc Q4 2025 Earnings Call Transcript

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

Question: Andrew Lazar - Barclays Services Corp - Analyst : Great. Thanks. Good morning, everybody. Sean, I know you and I think other industry leaders have often said that it doesn't make much sense for a company to take sort of a full margin reset to increase spending against the consumer if they're not sort of ready to engage in some categories yet because that means you don't really get the required lift on that spend. And you also may not get all the margin back in a reasonable time frame. But I guess as we've seen with some other sort of fiscal year reporters of late and with Conagra's '26 guidance today, it does appear a more aggressive investment approach is sort of needed and being taken. And I guess my question is, should that suggest to us that you think the current challenges the industry is facing are more structural this time around? Or how should we read all of that?

Question: Andrew Lazar - Barclays Services Corp - Analyst : Got it. Thanks very much. I'll pass the line. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 10, 2025 / 1:30PM, CAG.N - Q4 2025 Conagra Brands Inc Earnings Call

Question: Peter Galbo - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Hey, guys. Good morning. Thanks for taking the question. Dave, maybe you could just help us unpack the 4% core inflation number for fiscal '26. There's obviously a lot of buckets within that, but maybe just some of the moving pieces there, what's inflating double digits? What's down to kind of net you to the 4% just as we kind of think about all the moving parts? Thanks.

Question: Peter Galbo - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Got it. No, that's helpful context. And apologies guys here, and equity guys going to ask a leverage question, which I know can always come off a little weird. But look, Dave, like with where the leverage is projected to go this year, the need to kind of shore up the supply chain with the capital spend. Just like your draws on cash are pretty significant. And so I guess the broader question that we're feeling this morning is like why not address the dividend. The payout ratio is very high. Again, you got a refi a lot. So maybe you can just touch on -- and in the prepared remarks, you said it twice, I think, on maintaining the dividend. Just why that is the best course over the next year? Thanks very much.

Question: Andrew Lazar - Barclays Services Corp - Analyst : Thanks very much.

Question: Leah Jordan - Goldman Sachs Group Inc - Analyst : Thank you. Good morning. I just wanted to follow up on the last discussion. Just curious what you've embedded within your guidance on elasticity on the back of your planned pricing action in the back half and maybe how that compares to your historical trend? And I guess what gives you confidence in the ability to take pricing as you kind of called out, consumers have accelerated their value-seeking right now and data would suggest you're still losing dollar share across many categories? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 10, 2025 / 1:30PM, CAG.N - Q4 2025 Conagra Brands Inc Earnings Call

Question: Leah Jordan - Goldman Sachs Group Inc - Analyst : Very helpful. Thank you.

Question: Max Gumport - Exane Bnp Paribas - Analyst : Thanks. Sean, the inflation super cycle had initially largely played out as you expected in the first few years of it with the gross margin getting hard as pricing [let's inflation], but then ultimately recovering as pricing caught up to inflation. And I think that was all very much in line with what you had seen in past cycles, it was viewed as predictable. However, now you're heading into a year that you expect 7% inflation. And this time it feels a bit different. It doesn't sound like there's much in the way of pricing coming on given where the consumer is. So I'm trying to get a sense for how you expect this cycle to now play out. I think you touched on it a bit in your response to Andrew's question, but I'm hoping to get a bit more color on how you expect to see the business progress from the 11% to 11.5% operating margin you expect for this year over the next few years? And if there's a view on where the underlying margin or the normalized margin for the business now is the timeline to get back to that margin? Thanks very much.

Question: Max Gumport - Exane Bnp Paribas - Analyst : Great. Thank you. And related to that, the business has gone through several years now, I think, four or so of volume declines. And it sounds like FY26 could potentially have a modest volume decline as well. So I was hoping to get a bit more color on the operating deleverage that you've seen the business face over the last several years. And whether at this point, you see any need to rationalize your manufacturing footprint or right size the organization anyway? I'll leave it there. Thanks very much.

Question: Max Gumport - Exane Bnp Paribas - Analyst : It does. Thanks very much. I'll pass it on.

Question: Chris Carey - Wells Fargo Securities LLC - Analyst : Hey, everyone. Hope you're well. I have two questions. The first question is on our math; it does appear that you potentially need productivity to kind of run twice the rate that you've historically driven as a benefit to gross margins. I wonder if that checks out on your math, this idea that you do need a substantial step-up in productivity. And I just wonder if you could give a little bit more detail on some of the drivers around that step up just as a starting point?

Question: Chris Carey - Wells Fargo Securities LLC - Analyst : No, that makes total sense. I think there's a bit of a difference between the gross productivity and the net productivity inclusive of operational offsets. And that's probably a broader conversation, but productivity ramps and that makes sense. Just the follow-up would be private label is going to be seeing a lot of inflation as well, presumably that should be maybe improving your competitive stance vis-a-vis private label, presumably private label will need to take pricing given the amount of pressure that this cohort will be under. I just wonder if you have any thoughts about some of the opportunities that this sort of inflation might give you from a competitive standpoint, specifically relative to private label? Thanks.

Question: Chris Carey - Wells Fargo Securities LLC - Analyst : Okay. All right. Thanks so much.

Question: Robert Moskow - Cowen and Company LLC - Analyst : Sorry about that. Can you hear me now?

Question: Robert Moskow - Cowen and Company LLC - Analyst : Okay. Sorry. Sean, I wanted to know about all the innovation that you're doing in frozen. I mean no one does more than Conagra in frozen to help try to grow the category. But I think it's been difficult to see evidence that the innovation helps you premiumize or raise price. And you see it in other consumer staples categories where they use the innovation to justify higher pricing. Of all the new products you're introducing this year, were you able to do that in any instances or is it just too hard in this environment?

Question: Robert Moskow - Cowen and Company LLC - Analyst : Okay. Thank you.