US food group Conagra Brands has lowered its forecast for annual sales due to supply chain disruptions affecting two product categories.
The Birds Eye brand owner now expects its organic net sales to decline by around 2%, down from the previous guidance which was near the midpoint of negative 1.5% at worst to flat at best.
Go deeper with GlobalData
Conagra cut its forecast for its adjusted earnings per share to $2.35 from the prior range of $2.45 to $2.50.
The company also reduced its adjusted operating margin forecast to approximately 14.4% from its previous estimate of 14.8%.
In addition to supply chain challenges, unfavourable foreign exchange rates are expected to weigh further on earnings, the company said in its release.
Commenting on the revision in sales guidance, US analyst Robert Moskow said: “By our count, this marks the seventh time that supply chain incidents have affected business results in the past two years.”
Moskow added: “Some may view FY26 as an opportunity for a rebound year given the comparison to three supply chain issues in FY25 (including Hebrew National in 1Q). However, given the frequency of Conagra’s incidents and the weak growth in their categories, we think conservatism is warranted.”
Manufacturing issues at Conagra’s primary facility for preparing and cooking chicken in frozen meals led to temporary production halts, operational adjustments, and a gradual restart at reduced capacity.
The company also worked with third-party manufacturers to stabilise supply, but the disruption resulted in lower volume, net sales, and profitability in the second half of FY25.
However, Conagra still plans to modernise the facility, with upgrades scheduled for completion by the end of the first quarter of its 2026 financial year.
To manage supply during this period, the company will partner with third-party manufacturers to build inventory while keeping production at a reduced pace.
In its frozen vegetables business, a “strong” performance in Conagra’s second quarter led to rapid inventory depletion and product shortages in stores.
Consumption growth nearly doubled between December and early January versus the year-ago period, prompting Conagra to implement “strict” product allocations and reduce merchandising efforts from January through to March to rebuild stock ahead of the Easter holiday season.
This has resulted in a loss of volume, particularly in the third quarter of the financial year, the company said.
To address supply pressures, the food group has invested in additional surge capacity to accommodate ongoing demand.
Conagra president and CEO Sean Connolly said the company has seen “strong and consistently improving demand” this year following certain investments.
He also acknowledged recent challenges in meeting that demand but noted that the company’s “investments in infrastructure and strategic partnerships position us for long-term success”.
Other financial expectations – including capital expenditures, free cash flow conversion and interest expense among others – remain unchanged from the company’s previously published guidance.
The company added the updated guidance does not account for the potential impacts from new tariffs.
Headquartered in Chicago, Conagra owns a portfolio of brands including Birds Eye, Duncan Hines and Healthy Choice among others.
In December 2024, Conagra Brands announced plans to affix labels on some of its Healthy Choice products in 2025 in a bid to catch the eye of users of GLP-1 drugs.
