ConAgra Foods recently released its financial results for the first quarter of 2017, which it said is likely the last earnings release as ConAgra remains on track to execute the spin-off of the Lamb Weston business this fall. The spin-off will result in two independent, publicly traded, pure-play companies: Conagra Brands and Lamb Weston.
The results showed that net sales decreased 5% as a result of volume declines associated with the company's actions to build a higher-quality revenue base, which were partially offset by Lamb Weston's continued growth and increased price/mix. Divestitures and the impact of foreign exchange reduced sales approximately two percentage points.
“We continue to make strong progress as we reshape our portfolio, capabilities and culture,” said Sean Connolly, president and chief executive officer of ConAgra Foods. “Our efforts to infuse focus and discipline into our consumer businesses are clearly enabling us to expand our margins as we build a higher-quality revenue base, improve efficiency and deliver stronger, more consistent performance. While we are taking broad-based actions to build a higher-quality revenue base, the related volume declines are concentrated in brands where we have historically underpriced and over-promoted.”
Generally accepted accounting principles (GAAP) gross profit grew 3% to $724 million compared with $701 million in the year-ago period, and adjusted gross profit grew 3% to $728 million. The increases were driven primarily by increased price/mix, input cost favorability and supply chain productivity, which more than offset the decline in volume. As a percentage of net sales, both GAAP gross profit and adjusted gross profit were 27%, compared with 25% in the prior year.
GAAP diluted earnings per share (EPS) from continuing operations for the first quarter of fiscal 2017 were 42 cents, an increase of 10% compared to 38 cents in the year-ago period. Adjusted diluted EPS from continuing operations was 61 cents, compared to 41 cents in the year-ago period, an increase of 49%. The growth reflects strong performance in the Commercial segment's Lamb Weston business, margin expansion in the Grocery & Snacks segment, lower selling, general and administrative (SG&A) expenses and a lower interest expense as a result of debt reduction. These benefits were partially offset by volume declines, the previously reported recall in the Refrigerated & Frozen segment and the impact of foreign exchange.
Conagra Brands and Lamb Weston plan to host investor events on Oct. 18 and Oct. 13, 2016, respectively, to share more details, including fiscal 2017 and longer-term outlooks, growth initiatives, efficiency programs and capital allocation priorities.
Connolly said he was pleased with the performance of the Lamb Weston business in the quarter and added that the company looks forward to sharing more detailed information on Lamb Weston and Conagra Brands soon.