Chicago, Illinois, U.S.A.-based packaged food company Conagra has lowered its earnings forecast for its 2025 fiscal year again, citing supply constraints and other obstacles.
After originally lowering the forecast in December 2024, executives at Conagra, the maker of Van de Kamp’s, Mrs. Paul’s, Healthy Choice, and other major frozen food and snack brands, said on 18 February that they were lowering it another notch, specifically dropping its organic net sales forecast by 2 percent.
Prior guidance placed organic net sales to remain flat at best and decline 1.5 percent at worst, but the persistent challenges have forced the firm to shift the forecast down to a 2 percent drop. Additionally, earnings per share have dipped from between USD 2.45 (EUR 2.35) and USD 2.50 (EUR 2.40) to USD 2.35 (EUR 2.25) per share in the new guidance.
“The company has experienced customer service interruptions during the third quarter [of the 2025 fiscal year] due to supply constraints on two product platforms: frozen meals containing chicken and frozen vegetables,” the company said. "In addition, foreign exchange rates are now expected to provide a further headwind to adjusted earnings per share.”
Those Q3 customer service interruptions included issues at the primary facility that prepares and cooks chicken used in Conagra frozen meals.
“When the company began to see product quality inconsistencies coming off the production lines, it promptly took corrective action. This included temporarily stopping production, implementing operational adjustments, and restarting at a slower pace to restore product consistency,” Conagra said, while adding that it utilized third-party manufacturers to fill gaps where possible. “While these actions enabled the company to resume production that meets our strict quality standards, the net impact of this issue is lower volume, net sales, and profit in the second half of the fiscal year.”
Further constraining supply, consumption growth rates in Conagra’s frozen vegetable business nearly doubled through December and early January compared to the previous year, which led to stores running out of stock.
“In turn, the company put customers on a strict product allocation and reduced merchandising from January through March 2025 in an effort to rebuild inventories ahead of the Easter holiday. The net effect is lost volume, primarily in the third quarter of fiscal 2025,” Conagra said.
Persistent inflation is also hampering sales, executives said.
Nevertheless, Conagra President and CEO Sean Connolly and other executives said that although the company is expecting near-term dips, the company’s leadership in the frozen foods and snacks markets will help fuel growth in the longer term.
“Frozen and Snacks are our largest and fastest-growing businesses. We concentrate our investment and integration resources here to drive growth,” Conagra Co-Chief Operating Officer Tom McGough said.
The company is the largest frozen food business in the U.S., with more than USD 6 billion (EUR 5.8 billion) in retail sales, according to McGough, who added that Conagra generated USD 1.6 billion (EUR 1.5 billion) in sales last year from products that were introduced in the past five years, the majority of which were in the frozen category.
One such product that the company introduced in 2024 was Shark Bites, made with Alaskan pollock and available under both the Van de Kamp’s and Mrs. Paul’s brands.
“As we started to look at the generations, we saw huge use of chicken nuggets with families, especially small children. But, it wasn’t that much with fish sticks, and it wasn’t that much with older kids and not younger kids,” Conagra Senior Vice President of Demand Science Bob Nolan said in December. “We saw it was an opportunity to launch Shark Bites, [adding] a little bit of fun choices of the sea [to what is] out there.”
Frozen foods like Shark Bites are “structurally advantaged” for long-term growth, McGough said.
"Growth is driven by higher levels of consumer acceptance and usage. What we see is consumers continue to discover frozen's quality, convenience, and superior relative value; there's also a demographic tailwind,” he said.
Besides the strong outlook for frozen food, the supplier is also well-positioned for future growth because it has reduced debt by USD 600 million (EUR 575 million) in the last four quarters, Connolly said, attributing the reduction to strong cash flow conversion.
“We are committed to investing behind our brands and innovation and delivering the high-quality products our customers expect. We are pleased with the strong and consistently improving demand we have experienced this year as a result of those investments,” Connolly said in the press release. "While we've faced recent challenges servicing that demand, our investments in infrastructure and strategic partnerships position us for long-term success.”
