(Bloomberg) -- Packaged-foods maker Conagra Brands Inc. cut its sales and earnings forecast, blaming a slowdown at restaurants over the holiday season and subsequent weakness at retailers in January.
The Chicago-based company now anticipates organic sales to be flat or to grow only 0.5% in the fiscal year that ends in three months, a reduction from its prior growth forecast of 1% to 1.5%, according toa statement Monday.
Conagra said adjusted earnings for the year should amount to $2 to $2.07 a share, worse than its previous $2.07-to-$2.17 prediction. Analysts surveyed by Bloomberg had estimated $2.11 on average.
“Consumption softness in the quarter first emerged in the foodservice industry, with holiday restaurant traffic weaker than last year,” Chief Executive Officer Sean Connolly said in the statement. Sales to restaurants and other foodservice establishments accounted for almost 10% of Conagra's total revenue last year.
“Softness pivoted to retail in January and impacted numerous categories across food, including several in which we compete,” the CEO added.
Conagra shares have fallen 4.5% since the end of last year after being one of the best performers among consumer-staples companies for the last three months of 2019. While the company didn't specify where it is seeing weakness, several of its brands are found in the center aisles of grocery stores where foot traffic is declining, including Birds Eye, Healthy Choice, Duncan Hines and Slim Jim.
“While we planned for tougher year-over-year comparable results in the third quarter, we did not plan for this level of category softness,” Connolly said.
Conagra expects organic sales growth to return in the fiscal fourth quarter, saying it has gained market share in many categories and believes “the recent consumption weakness is abating.” Conagra's third quarter ends Feb. 23.
The company will present at the Consumer Analyst Group of New York (CAGNY) Conference on Tuesday at 9 a.m. local time. In a slides posted ahead of the event, Conagra called the recent weakness an industrywide “air pocket.”
“We now question what this could mean for other companies presenting this week,” Rob Dickerson, an analyst at Jefferies LLC, wrote in a research note Monday. “Will the air pocket emerge as a theme across the rest of the food space?”
Other companies slated to present at the conference Tuesday include General Mills Inc., Mondelez International Inc. and McCormick & Co.
To contact the reporter on this story: Catherine Larkin in Chicago at clarkin4@bloomberg.net
To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Nick Baker, David S. Joachim
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