Buoyed by its 2013 private brands acquisition, ConAgra Foods saw third-quarter net income nearly double despite sales declines in its consumer and commercial foods businesses.
The Omaha-based food manufacturer on Thursday reported net third-quarter income of $234.3 million, or 55 cents per share, up from $120 million, or 29 cents per share, a year ago.
Private brand sales, lifted by the firm’s acquisition of Ralcorp Holdings with 27 days left in the third quarter of 2013, were $1.06 billion, contributing to total quarterly sales of $4.4 billion, up 14.5 percent from the year before. Still, ConAgra said the private brand segment’s performance is “below plan” because of issues it has previously disclosed and is working to improve, including poor sales force organization and price cuts.
“Overall we’re making gradual progress on the business and remain confident in the long-term private brands strategy,” Chief Executive Officer Gary Rodkin told analysts Thursday.
In ConAgra’s two other segments, sales of consumer foods fell 3.5 percent to $1.87 billion, and commercial foods sales fell 0.7 percent to $1.46 billion, for the quarter ended Feb. 23.
Consumer brands posting sales growth included Bertolli pasta, Hebrew National hot dogs and Slim Jim meat snacks. ConAgra said three of its largest brands — Healthy Choice, Orville Redenbacher’s and Chef Boyardee — continue to struggle and posted “substantial volume declines,” as it had previously projected.
Those three brands have collective annual sales of more than $1 billion. The turnaround strategy involves a “maniacal focus” on core users of those products, Rodkin said, as opposed to marketing to a new audience.
An analyst asked whether ConAgra can “renovate” those brands to attract the growing numbers of millennial consumers. Rodkin said that’s not the plan. “We’re going to go after the core users and we’ll pick up some millennials along the way through osmosis, but it won’t be our focus.”
ConAgra is implementing product changes, in-store initiatives and new marketing messages to combat the sales decline. New products include a Pam cooking spray with coconut oil being marketed “for healthy cooking,” and an Italian meat pie called a torta, which extends the Bertolli line using ConAgra’s existing Banquet and Marie Callendar’s pot pie production capabilities.
Adjusting for items affecting comparability, ConAgra reported earnings per share of 62 cents, compared with 55 cents the prior year, up 13 percent. Those items included acquisition-related costs and hedging gains.
ConAgra said it is on track to meet its most recent full-year earnings projections of $2.22 to $2.25 per share in fiscal 2014. Expectations were lowered in February, with ConAgra citing the issues turning around the Ralcorp business and its declining consumer foods sales.
ConAgra also said Thursday its Ardent Mills joint venture is still expected to close by June 30. The transaction has been postponed twice because of an ongoing regulatory review.