(Reuters) — ConAgra Foods Inc. expects its current quarter profit to be well below estimates, hurt by a drop in sales of brands such as Marie Callender’s frozen meals and Chef Boyardee pasta.
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.
Chief executive officer Gary Rodkin said the company was taking action, such as investing in products and 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.
The consumer business, which accounted for 60 percent of sales in the fiscal year that ended May 30, also includes brands such as ACT II popcorn, Slim Jim beef jerky and Pam cooking spray.
“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,” said Morningstar analyst Erin Lash.
ConAgra Foods, which counts Wal-Mart Stores Inc. among its customers, said it expects second quarter earnings to be 55 cents per share. Analysts had expected a profit of 63 cents per share.
Sales in the first quarter rose 27 percent to $4.2 billion but missed the average analyst estimate of $4.29 billion, according to Thomson Reuters.
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.