Sales decline
Inflation
Inflation took a toll on Conagra’s margins and profitability during the fourth quarter. Gross profit decreased 22% due to a decline in net sales, inflation in cost of goods sold as well as lost profit from the divestitures. Gross margin decreased 172 basis points to 26.3% in Q4 on a reported basis.
The decrease in gross profit caused a 29% decline in adjusted net income to $261 million, or $0.54 per share. On a reported basis, net income increased nearly 54% to $310 million, or $0.64 per share, as gross profit declines were offset by tax benefits from the restructuring of the Ardent Mills joint venture investment.
Lowered outlook
Conagra believes the demand for its retail products will remain high during FY2022 due to shifts in customer preferences brought on by the pandemic. However, the company expects input cost inflation to be higher than expected during the upcoming year. The branded foods provider expects to tackle this cost increase through various actions including broad-based pricing.
Conagra anticipates a lag between the time it is hit with higher costs and when it realizes the benefit of its actions and the impact of this lag is expected to be at its highest during the first half of 2022. The company expects organic net sales growth in FY2022 to be approx. flat compared to FY2021.
Conagra lowered its guidance for adjusted EPS to $2.50 from the previous range of $2.63-2.73. Adjusted EPS in the second half of the fiscal year is estimated to be in line with the previous assumptions for FY2022.