(Reuters) — ConAgra Foods Inc. forecast current-quarter profit well below estimates, hurt by a drop in sales of brands such as Marie Callender’s frozen meals and Chef Boyardee pastas.
Shares of the company, which also posted lower-than-expected first-quarter results, fell as much as six percent in morning trading on Thursday.
The company’s products compete in highly competitive categories that are dominated by larger players such as Heinz and Kraft Foods Group Inc. The company also faces competition from lower-priced private label players.
ConAgra said first-quarter sales in its consumer foods business, which sells meals, condiments, snacks and desserts, fell two percent as retailers sought cheaper options in the face of intense competition.
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Chief executive Gary Rodkin said the company was taking actions such as investing in products, increasing promotional activity and merchandising to improve sales in the business.
“We currently expect that it will take some time to impact these trends and therefore we expect consumer foods volume and operating profit to be soft through the second quarter,” Rodkin said on a conference call with analysts.
The consumer business, which accounted for about 60 percent of sales in fiscal year ended May 30, also includes brands such as ACT II popcorn, Slim Jim beef jerky and PAM cooking sprays.
“We have long thought their prospects would be hindered because of their second and third-tier brands and we don’t expect that competitive pressures will abate materially over the near term,” Morningstar analyst Erin Lash told Reuters.
The Omaha, Nebraska-based company, which counts Wal-Mart Stores Inc. among its customers, said it expects second-quarter earnings to be about 55 cents per share. Analysts had expected a profit of 63 cents per share.
Sales in the first quarter rose 27 percent to $4.20 billion, but missed the average analyst estimate of $4.29 billion, according to Thomson Reuters I/B/E/S.
Net income fell 42 percent to $144.3 million, or 34 cents per share, in the quarter ended Aug. 25, from $250.1 million, or 61 cents per share, a year earlier.
Excluding items, it earned 37 cents per share, two cents below Wall Street’s expectations.
ConAgra shares were trading at $30.96, down 3.5 percent in afternoon trading on the New York Stock Exchange.
