(Reuters) - Conagra Brands Inc’s quarterly profit beat Wall Street estimates on Thursday, as the Reddi-wip and Slim Jim beef jerky maker raised prices to make up for higher transportation and commodity costs, sending shares up 7 percent before the bell.
Like most packaged food companies, Conagra is wrestling with higher material and freight costs due to driver shortages and new regulations.
Simultaneously, the industry is struggling to keep up with rapidly changing consumer preference for healthy, fresh food. There’s also stiff competition from restaurants and food delivery services that deliver ready-to-eat meals in less than thirty minutes.
To combat competition from all quarters, Conagra made several acquisitions including millennial favorites Angie’s Boomchickapop popcorn and Duke’s smoked meats, and splurged billions to buy Birds Eye frozen vegetables and Duncan Hines cake mix owner Pinnacle Foods in October.
Last quarter, Conagra blamed Pinnacle’s sub-par innovation for poor sales. In its latest quarter, sales from Pinnacle fell in mid-single digits.
For the full year, the company said it expects sales for Pinnacle in the range of $1.71 billion to $1.73 billion, compared with $1.70 billion to $1.75 billion it had projected earlier.
“We are aggressively applying our proven ‘Conagra Way’ to address the executional challenges in the Birds Eye, Duncan Hines and Wish-Bone businesses,” Chief Executive Sean Connolly said.
Earlier this month, the company announced new products such as gluten-free mugcakes under Udi’s and frozen burritos and meal bowls under Evol, brands it acquired from Pinnacle.
Excluding certain items, Conagra earned 51 cents per share in the third-quarter ended Feb. 24, beating estimates of 49 cents, according to Refinitiv IBES data.
Net sales rose 35.7 percent to $2.71 billion, but fell below the average analyst estimate of $2.75 billion.
Organic sales, which exclude impact from foreign exchange and acquisitions, rose nearly 2 percent driven by sales of frozen foods and snacks such as Orville Redenbacher’s and Act II popcorn.
Net income attributable to the company fell to $242 million, or 50 cents per share, from $362.8 million, or 90 cents per share, a year earlier.
Reporting by Nivedita Balu in Bengaluru; Editing by Anil D’Silva and Shinjini Ganguli
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