(Bloomberg) -- Conagra Brands Inc. shares fell the most since June 2019 after the maker of Slim Jim and Healthy Choice meals said reduced prices on certain frozen items and butters hurt its most recent earnings, and supply chain problems raised questions about profit going forward.
With food prices up around 25% since 2019, consumers have been cutting back on purchases at the supermarket. The company has used discounts and promotions to lure shoppers, especially in the frozen category, Chief Executive Officer Sean Connolly said during the company’s fiscal first-quarter earnings call on Wednesday. That has squeezed margins, along with higher costs for beef and sweeteners.
The company has seen deflation in edible fats and oils, driving permanent price cuts for its oil-based spreads, which include the Smart Balance, Earth Balance and Blue Bonnet brands.
Conagra also said that a piece of equipment needed to be replaced at a Hebrew National factory in the middle of grilling season, resulting in a pause in production. Hebrew National makes hot dogs and deli meats. While back up and running, the disruption hurt results by $27 million in the quarter.
Sales, profit and operating margin trailed estimates for the quarter ended Aug. 25. Earnings per share were 53 cents, Conagra said. Analysts had forecast 60 cents a share, according to the average of estimates compiled by Bloomberg.
In July, the company issued guidance for both sales and earnings per share that were below analyst expectations. It reaffirmed those forecasts.
Shares sank as much as 10% in New York trading on Wednesday. The stock is up 4.3% for the year to date, trailing the S&P 500 index.
The company said it would consider acquisitions, especially in the frozen and snacking categories. For the freezer section, Conagra already has products for lunch and dinner, “but breakfast, snacking and desserts — that’s a lot more white space,” Connolly said during an interview. “They’re all fair game.”
--With assistance from Deena Shanker.
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