December 21, 2010
OMAHA, Neb. (AP) — Poor shopper response to promotions helped cause ConAgra Foods Inc.'s fiscal second-quarter net income to fall 16 percent.
ConAgra initially benefited from the economic downturn as people ate at home more. But increased competition led many food makers and retailers to rely heavily on discounts and other promotions to drive sales.
That strategy, however, can punish profits, particularly if consumers don't respond as expected.
ConAgra, whose brands include Banquet and Chef Boyardee, reported Tuesday that it earned $200.9 million, or 45 cents per share, for the period ended Nov. 28. That's down from $239.7 million, or 54 cents per share, a year ago.
The Omaha, Neb.-based company warned investors earlier this month that its results would be weaker than initially expected.
Still, the performance met the estimates of analysts polled by Thomson Reuters.
CEO Gary Rodkin said in a statement that the company's consumer foods' segment was weighed down by difficult market conditions and higher-than-expected inflation for ingredients. To help combat inflation, ConAgra is raising prices on some of its products. Some increases have already occurred, with more under way.
The commercial foods division was hampered by the selling and processing of last year's low-quality potato crop, he added.
Revenue rose 2 percent to $3.16 billion, topping the $3.13 billion Wall Street expected.
Revenue for the consumer foods unit edged up 1 percent to $2.1 billion, while the commercial foods segment's revenue climbed about 3 percent to $1.06 billion.
The consumer foods division made up 67 percent of second-quarter revenue, while the commercial foods unit comprised 33 percent.
Looking ahead to fiscal 2011, ConAgra expects adjusted earnings to rise at a low-single digit percentage rate from its 2010 earnings of $1.74 per share.
Analysts predict earnings of $1.76 per share for 2011.
