Earnings call transcript: Conagra Brands beats Q1 2026 forecasts

Conagra Brands Inc. (CAG) reported better-than-expected earnings for the first quarter of fiscal 2026, with an earnings per share (EPS) of $0.39, surpassing the forecasted $0.33. This 18.18% surprise was accompanied by actual revenues of $2.63 billion, slightly ahead of the $2.62 billion forecast. The company’s stock rose by 4.75% in pre-market trading, reflecting positive investor sentiment. According to InvestingPro data, the company maintains strong profitability with a gross margin of 25.5% and has demonstrated consistent shareholder returns, having maintained dividend payments for 50 consecutive years.

Key Takeaways

• Conagra Brands exceeded EPS and revenue forecasts for Q1 2026.
• Stock price increased by 4.75% in pre-market trading following the earnings announcement.
• New product lines, including Dolly Parton frozen meals, showed strong initial performance.
• The company reduced net debt by $1.1 billion over the past year.
• Supply chain productivity improvements are expected to deliver over 5% efficiency in fiscal 2026.

Company Performance

Conagra Brands demonstrated strong performance in the first quarter of fiscal 2026, with results exceeding analysts’ expectations. The company’s strategic focus on inventory management and product innovation contributed to its positive financial outcomes. In comparison to previous quarters, Conagra maintained its market leadership in the frozen meals category and showed resilience amidst a competitive landscape.

Financial Highlights

• Revenue: $2.63 billion, slightly above the forecast of $2.62 billion.
• Earnings per share: $0.39, exceeding the forecasted $0.33.
• Net debt reduced by $1.1 billion over the past 12 months.
• Service levels restored to 98%, enhancing operational efficiency.

Earnings vs. Forecast

Conagra’s actual EPS of $0.39 was 18.18% higher than the predicted $0.33, marking a significant earnings surprise. The revenue of $2.63 billion also slightly surpassed the $2.62 billion forecast, indicating strong sales performance. This earnings beat is a positive deviation from previous quarters, suggesting effective management strategies and favorable market conditions.

Market Reaction

Following the earnings announcement, Conagra’s stock price rose by 4.75% in pre-market trading, from $18.31 to $19.18. This movement reflects investor confidence in the company’s financial health and growth prospects. The stock’s performance contrasts with its recent decline, as it traded near its 52-week low of $17.89 before the earnings call. InvestingPro analysis indicates the stock is currently undervalued, with a strong free cash flow yield of 13% and trading at a low P/E ratio relative to near-term earnings growth. View more undervalued opportunities at Most Undervalued Stocks.

Outlook & Guidance

Looking ahead, Conagra anticipates positive organic sales growth in the second half of the fiscal year, despite expecting a low single-digit decline in Q2 2026. The company projects full-year inflation slightly above 7%, with a focus on volume growth in its frozen and snacks segments. Conagra’s guidance for fiscal 2026 includes an EPS forecast of $1.76.

Executive Commentary

CEO Sean Connolly emphasized the importance of maintaining consumer pull and market share, particularly in the frozen meals segment. He stated, "We fundamentally believe that the best thing for the future cash flows of our frozen business is to keep that consumer pull strong and keep our market share strong." Connolly also highlighted the company’s commitment to delivering value to consumers amid varying economic conditions.

Risks and Challenges

• Supply chain disruptions could impact product availability and cost efficiency.
• Inflationary pressures, particularly in protein costs, remain a concern.
• The competitive landscape requires continuous innovation to maintain market leadership.
• Economic fluctuations could influence consumer spending patterns.
• Commodity price volatility poses a risk to cost management strategies.

Q&A

During the Q&A session, analysts inquired about the impact of protein inflation on cost structures and the company’s strategic pricing actions. Conagra disclosed that it has 85% commodity coverage for Q2 and is managing elasticity carefully to mitigate price increases. The discussion also touched on the company’s efforts to modernize its chicken facilities and enhance supply chain productivity.

Full transcript - ConAgra Foods (CAG) Q1 2026:

Conference Call Operator: Good morning, everyone, and welcome to the Conagra Brands Q1 Fiscal Year twenty twenty six Earnings Q and A Conference Call. All participants will be in a listen only mode. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then 1. To withdraw your questions, you may press star and 2.

Please note today’s event is being recorded. At this time, I’d like to turn the floor over to Matthew Nysas, head of investor relations. Please go ahead.

Matthew Nysas, Head of Investor Relations, Conagra Brands: Good morning, everyone, and thank you for joining us. Once again, I’m joined this morning by Sean Connolly, our CEO and Dave Marburger, our CFO. We may be making some forward looking statements and discussing non GAAP financial measures during this session. Please see our earnings release, prepared remarks, presentation materials and filings with the SEC, which can be found in the Investor Relations section of our website for more information, including descriptions of our risk factors, GAAP to non GAAP reconciliations, and information on our comparability items. I’ll now ask the operator to introduce the first question.

Conference Call Operator: Our first question today comes from Andrew Lazar from Barclays. Please go ahead with your question.

Andrew Lazar, Analyst, Barclays: Great. Thanks so much. Sean, Conagra expects to return to positive organic sales growth in the fiscal second half, but also mentioned recent consumption trends in pointing to a low single digit decline expected in the second quarter. What’s driving the fiscal second half inflection? Or is it really just easy year ago comps?

And do recent consumption trends that you mentioned sort of give you any pause, particularly in light of the planned tactical pricing actions that you’re taking? And I guess, to what do you attribute the recent consumption weakness?

Sean Connolly, CEO, Conagra Brands: All right. Good morning, Andrew. Let me tackle that in reverse order. First, I wouldn’t overly read into any recent consumption trend data. To the degree you saw any softening at the end of Q1, that was tied primarily to the two things I mentioned in my prepared remarks, which is the shift of a major Angie’s Boom Chick a Pop promotional event to Q2 and the initial planned elasticity effect of the inflation justified pricing that we took on Duncan Hines due to cocoa costs.

So that’s kind of the Q1 concept. This quarter in Q2, some of our major frozen events are planned about a month or so later than year ago based on our supply ramp up. So pretty consistent with what we would expect in the full year, just a little bit of a shift in timing. So not much else to really discuss there. As for the basis of our expectations for further sales progress in the second half, it will be a combination of volume momentum on frozen, where we wrap last year’s supply constraints, plus continued volume momentum on growing businesses like protein snacks.

And then you have to also add what I’ll call dollar momentum on inflationary businesses where we’re taking price. That combination of factors reflects the horses for courses plan that we built. And what I mean by that is we are investing to drive volume in frozen and snacks while maximizing cash via inflation justified pricing and staples.

Unidentified Speaker: Got it. Got it.

Andrew Lazar, Analyst, Barclays: Thank you for that. And then fiscal first quarter came in ahead of expectations. Fiscal second quarter was moderated a bit in terms of your outlook. Net net, do you see fiscal first half as potentially coming in a bit better than originally planned? And then, Dave, how much was the benefit from trade expense timing to organic sales growth in the quarter?

Thanks so much.

Dave Marburger, CFO, Conagra Brands: Yes, Andrew. So taking the last part first, it was about 50 basis points of benefit in Q1, the trade timing, and then that will flip to Q2. So 50 basis points in terms of sales. So in terms of first half, I would say, given the kind of the flip and timing of that, given the fact that Q1, we had some benefit in inventory where we delayed some of the tariff costs, and now they’re going to be coming in, in Q2. I would say, generally, we’re still on track with our original plan for the first half.

There’s kind of different pieces. We talked about in our guidance, we’re a little favorable in interest expense, but our tax rate is a bit higher. So there’s obviously some puts and takes. But I think we’re pretty much on our first half plan.

Sean Connolly, CEO, Conagra Brands: Yes. And I would say, Andrew, that what I was looking for this quarter really were two things. Number one, can we get the service issues behind us? And getting to 98%, check. I’m feeling good about that.

And second, once we did that and could start to resume our merchandising activities and rolling out our innovation, are we getting the consumer takeaway and are we seeing inflection on key businesses? And check we saw that. So the consumer is certainly not out of the woods yet. We’re still seeing value seeking behavior. We’re still having to deal with inflation and tariffs.

But after a quarter, I think we’re feeling good about the setup for the balance of the year.

Andrew Lazar, Analyst, Barclays: Great. Thanks so much.

Conference Call Operator: Our next question comes from Peter Galbo from Bank of America.

Peter Galbo, Analyst, Bank of America: Sean and Dave, I just wanted to maybe touch on the updated core inflation outlook that you gave. I know you talked about some of the moving pieces within kind of the animal proteins. But maybe you can just remind us, a, kind of how you’re bought for the remainder of the year on some of those items? Are you kind of locked in now for the rest of the year? Just given that some of these cuts are very volatile and have moved, particularly check it over the past month has maybe moved more favorably.

So just want to understand the flex in that inflation guide as

Unidentified Speaker: we get in the back half.

Dave Marburger, CFO, Conagra Brands: Yes. So Peter, our original guidance, our overall inflation was approximately 7%. That’s split 4% kind of core inflation and then 3% gross tariffs. Then we had mitigation, obviously, on tariffs of about 1% to 1.5 on that. And then we have our productivity, which helps us offset our core inflation.

As we’ve gone through this quarter, we’re seeing more pressure on the core inflation. There’s been a little bit of movement on the tariffs, but generally, that’s immaterial. So the 3% gross tariffs we estimated at the beginning of the year are about the same. The increase in the overall inflation for the year is really coming from the core inflation, and that’s really driven by the animal proteins. And so particularly beef, pork, turkey, and then to some extent eggs relative to our original forecast.

To your question about kind of where we are, from a kind of overall coverage perspective, for Q2, we’re about 85% covered. Certain commodities are fully covered. But then the animal proteins, which has been a pressure point, that’s more spot market overall. We do take positions and freeze them. So we have capability to add coverage through freezing proteins.

But generally, that’s more market and spot based. And so about 85% covered Q2. And then for the full year, 60% to 65% coverage overall. But again, those proteins were exposed. If there’s additional inflation or if the inflation moderates, we’ll see a benefit from that.

Peter Galbo, Analyst, Bank of America: Great. Thanks for that, Dave. Very helpful. I wanted to pivot maybe to the balance sheet and the cash flow. Dave, I know you called out that there would be some debt pay down in the quarter.

I’ve gotten a few questions this morning just on the cash flow generation in the quarter. It was a bit maybe lighter than expectations and some of the inventory build. So maybe you can unpack both the debt paydown, how we should think about that in 2Q and the remainder of the year? Then just anything around kind of inventory build that happened in the quarter? Sure.

Dave Marburger, CFO, Conagra Brands: So let me kind of start from the top. When we gave our guidance, we had forecasted that we would pay down $700,000,000 in debt for fiscal twenty twenty six. That’s from both the proceeds from the divestitures as well as $100,000,000 from cash flow from operations to pay down debt. So we’re still on track with that. Actually, we included in our materials that we’re going to have additional favorability from the tax legislation.

We are estimating that at $75,000,000 So we built that into our specific free cash flow forecast yet, but that’s clearly going to be a benefit. As it relates to Q1, yes, we have and this is just solely timing. We built more inventory in the first quarter because, remember, we were coming off supply disruptions. And so we had to get back to service levels. So that was a priority.

We built our inventory. So our normal seasonal build affects Q1. Then we leaned in to make sure we had the right safety stocks on the areas where we had disruptions. And so you normally will see that in Q1. It’s a little bit more so.

Our inventory on hand, we have more days on hand, but that’s been planned. That’s timing. And we still feel comfortable about our full year forecast as it relates to inventory. So I would say we are on track. Q1 is the normal build.

And in the first quarter, our net debt is down about a little over $400,000,000 versus where we finished at the ’5. And as we said in the comments, on a rolling 12, we’ve reduced our net debt by $1,100,000,000 So feel really good about cash flow generation, both where we are and how we’re forecasting it for fiscal twenty twenty six.

Sean Connolly, CEO, Conagra Brands: Just one other piece of perspective on that inventory build. Of the peers in center store grocery have really struggled in the last year to generate consumer pull against their brands even when investing. We have not had that problem. So you may recall, we had six or seven quarters of straight line top line improvement as we invested in the pursuit of volume last year and we returned to growth in Q2. So we’ve got clear evidence that the brands and the innovation are working for consumers.

But we ran into the supply interruption and we had to pull a lot of our merchandising. So now that we’ve got service levels back, armed with that confidence that we can generate consumer pull because of these products, we absolutely convinced having inventory in place so we don’t fall out stock again and fail to keep up with consumer demand, particularly going into holiday season is absolutely the right thing to do.

Conference Call Operator: Our next question comes from Tom Palmer from JPMorgan. Please go ahead with your question. Mister Palmer, is it possible your phone is on mute? And just to confirm, the speaker room, are you able to hear me?

Sean Connolly, CEO, Conagra Brands: Yes. Yes. We yes.

Conference Call Operator: We can hear you. Okay. It looks like it looks like we’ve

Sean Connolly, CEO, Conagra Brands: got Palmer number two in the queue. So why don’t we go there, we’ll come back to Tom in a bit.

Conference Call Operator: Alright. Our next question comes from David Palmer from Evercore ISI. Sir, please go ahead with your question.

David Palmer, Analyst, Evercore ISI: Okay. Thank you. Good morning. Frozen frozen entrees, obviously, it’s been a great long term category for Conagra. Just looking at the recent recent data, and I know there’s reasons for this, maybe some overhangs from some of the past supply chain stuff.

But wondering, you know, what is what is your state of the union with with that category? It looks like you guys are losing share and the category is declining. You know, for years, you guys were driving the majority growth in a category that was at at oftentimes growing at least a little bit. So wonder what your frozen outlook is, frozen entree in particular, outlook is through the rest of the year? And I have a quick follow-up.

Sean Connolly, CEO, Conagra Brands: Sure. All right, David. Yes, our outlook is positive. The simple way to think about frozen meals is the category goes as ConAgra goes. That’s been the rule for the last seven or so years.

When we didn’t innovate back in the day, the category didn’t grow. When we committed to innovating frozen, the category grew steadily for a long, long time. So including, by the way, in our Q2 last year, I think our frozen business was up in the ballpark of 3%. So we’re coming off of a back half of last year where we had made service interruptions in that business. We walked away from major merchandising.

And that hands our merchandising to competitors who then get in the plans, customer plans, for a period of time while we’re working to get service levels back. That contributed, obviously, to us being a share donator, which is the first time that’s happened in years and years and years. But that’s obviously a temporary phenomenon tied to our supply interruption. So what you’re seeing now is our innovation is rolling into the marketplace. Our service levels are back to 98%.

And we’re getting kind of back in the queue on these major events and feel extremely bullish about it. We’ve got some absolutely fantastic innovations that we rolled out last year that were interrupted. We’re rolling out new ones this year. And they’re already off to a particularly strong start. I will draw your attention to the new Dolly Parton frozen meals and frozen desserts that are new in the marketplace and performing extremely well.

And what’s encouraging about that as well is they’re not only performing well, that’s a premium priced product. So that’s good mix for us too. So I have tremendous confidence in our frozen business. To win in frozen, you’ve got to have scale and you’ve got to have an innovation machine. And we’ve got the best in the business.

So we’re looking forward to continued momentum on that business as we go through the year and wrap some of the weak spots in the last year second half.

David Palmer, Analyst, Evercore ISI: And just a very general big picture question. You’re going to have those easier comparisons in the second half of the year, and you’re going to be more on your front foot. I’m wondering what are some don’t know if there’s exact metrics you can share, but what are the things you’re going to be looking for in the second half that will really tell you that you can get back to balanced sales and profit growth in fiscal ’twenty seven, if that is the goal here is to get back to an on algo in ’27, what would kind of let you know you’re there, clearly growing against some of these comparisons might not be enough for that? So perhaps give us a sense of what you think would be good enough in the second half to show us you’re really on track again. David,

Sean Connolly, CEO, Conagra Brands: you once had a good piece of wisdom for me. You said your hero business has got to be heroes, meaning frozen and snacks need to grow. And I think that is well said. I think for this company, frozen and snacks are clear growth categories. It represents about 70% of our retail business.

We’ve had tremendous momentum on both of those businesses leading up to the supply challenges we had last year. And by the time we exit this year, I want to see real momentum and inflection on those businesses. We’ve already got it within the key strategic snacks businesses. For example, Slim Jim right now is tracking really well. C store is coming back.

That’s very encouraging. And our new innovation on Slim Jim, which is our new Buffalo Wild Wings Buffalo Chicken Slim Jim, is performing really well out of the gates. That’s a very positive sign. On Frozen, it’s all about getting back in the queue on merchandising events with customers and then making sure that innovation that we work so hard to build performs. And so far, it looks good.

Those businesses with a positive trajectory as we move through the year, I think, is a very, very positive sign for next year when we’ve got some of these margin clawback opportunities in front of us. So that will be a combination of good looking top line and an improving gross margin line as well, and I’m looking forward to that.

David Palmer, Analyst, Evercore ISI: Our

Conference Call Operator: next question comes from Brian Adams from UBS.

Brian Adams, Analyst, UBS: Hey. Morning, guys. Thanks for the question. Maybe just first a quick housekeeping one following up on on David’s question there. So 1Q volume performance for refrigerated and frozen came in a lot better than I think maybe scare trends would have suggested.

And I think in the prepared remarks, said volumes for frozen itself were up like 3% or so. Was there any like elevated shipments in the 1Q as you were finishing up restoring supply at shelf? Or is this pretty consistent with the consumption trends that you were seeing?

Sean Connolly, CEO, Conagra Brands: Brian, the 3% number, that was I was referring to Q2 last year when we Frozen was back growing strongly in Q2. Shipments were a little bit ahead in the quarter, which is pretty typical at a time when you’ve been out of stock and you’re kind of replenishing. I wouldn’t overthink this because if you look at our company on kind of a rolling four quarter basis, shipments and consumption are almost always equal. So for us, it doesn’t really amount to much. So I wouldn’t overthink that piece.

Anything you’d add to that?

Conference Call Operator: The only

Dave Marburger, CFO, Conagra Brands: thing I would say, just you’re just converting shipments to consumption within the quarter for R and F that Hebrew, obviously, because prior year shipments were really strong. So there’s a little bit of benefit, shipments versus consumption related to Hebrew within Q1 for R and F.

Brian Adams, Analyst, UBS: Okay, awesome. Thanks. Yes, not my best reading comprehension, I guess, there. On the margin clawback opportunities that you just actually spoke to, can you kind of just like run through those high level for us as we think about ’27? Because some of the stuff, you know, like some of the costs you’ve had this year, like tariffs, like, that’s not necessarily something you can assume goes away.

But then I also know you have some work in process on the on the chicken, and then I’m not really sure the the puts and takes on SG and A. But do you mind just running through those, Sean, as you see them today?

Sean Connolly, CEO, Conagra Brands: Sure, absolutely. Yes, I’ll tick off five things that I mentioned last quarter that remain intact. It starts with productivity. So in fiscal twenty twenty six this year, between core productivity and tariff mitigation, that number is just over 5%, which is very strong. And by the way, Q1 came in right above that level, which is a super strong quarter.

So that will continue. Supply chain team is doing a nice job. Second, at some point we’re going to get inflation relief. Somebody mentioned proteins a little bit ago, hopefully back closer to our typical 2%. If you look back one hundred years as we have, any time we’ve had these kind of runaway inflation cycles like this, there’s always been relief on the other side of the hill.

So at some point that will happen. Obviously can’t call exactly when. Third, the advancement of our supply chain resiliency investments, including the chicken plants will enable us to repatriate some of that outsourced production going forward at lower costs. Fourth, we are taking pricing in certain categories. So after you get past the initial lag of inflation hits and you wait ninety days or so to get pricing in, you get start to get the benefit of that.

And then fifth, I mentioned last quarter, we were kicking off an ambitious initiative to reengineer our core work processes, leveraging technology, including AI. We have kicked that work off to accelerate growth and lower costs. We’ll have more to report on that going forward, but that’s an exciting possibility. So between those actions and our ongoing efforts to reshape the portfolio for faster growth and better margins, we do expect good margin expansion following fiscal twenty twenty six.

Brian Adams, Analyst, UBS: Our

Conference Call Operator: next question comes from Robert Moskow from TD Cowen. Please go ahead with your question.

Robert Moskow, Analyst, TD Cowen: Hi, thanks. I have a phasing question about 2Q volume, Dave and Sean. I’m just looking at comparisons versus year ago on volume. And it would appear that the volume growth comp would get tougher in 2Q compared to 1Q because of the Hebrew comparison and also because you had a lot of frozen vegetable volume in 2Q. So should I assume that volume growth is or volume declines are similar in 2Q as in 1Q because of those comps?

Or is the merchandising activity enough to provide some sequential improvement in volume?

Dave Marburger, CFO, Conagra Brands: Rob, this is Dave. We have obviously a ton of brands, and so there’s a lot of moving pieces, a lot of dynamics on merchandising. Generally speaking, the volume that we had in Q1 should be similar in Q2 and when you net it all together for total company. In terms of growth? Okay.

In terms of volume, year on year growth.

Sean Connolly, CEO, Conagra Brands: Yes. And just for perspective, Rob, on the year to go basis, we had strong investment profile in merchandising last year. We had to pull back on some of that in the second half. We have a very strong investment in merchandising behind this innovation for the year to go period as well. And as I mentioned, some of those innovations which just are getting growing now are already performing quite well.

So we’re looking forward to that. And you saw in the promotion chart I shared in the prepared remarks that while we’ve had some of the merchandising restored in Q1, there is room to go as we move through the back half of the full year.

Andrew Lazar, Analyst, Barclays: Got it. Thanks, Sean.

Conference Call Operator: Our next question comes from Megan Klap from Morgan Stanley. I

Matthew Nysas, Head of Investor Relations, Conagra Brands0: wanted to start with maybe a follow-up, Sean, to Andrew’s second question at the beginning, just around how the quarter played out and how you’re tracking so far. You made a comment last quarter that you viewed the fiscal ’twenty six guide as prudent given the operating environment. And you talked a lot about a lot of encouraging things that you saw in 1Q. At the same time, consumer sentiment is weak. You talked about value seeking behavior.

Cost inflation is a bit higher. So just putting all those puts and takes together, I guess when you think about the fiscal twenty twenty six guide today, you reiterated it. Would you still characterize it as prudent? And maybe where is the guide in your mind the most conservative? Well,

Sean Connolly, CEO, Conagra Brands: think it remains prudent. As I mentioned to somebody this morning that the two things I was really looking for in this quarter is we got to get service back, right? Because we had a lot of momentum. That momentum was very materially interrupted in the back half of last year because of service. And we’ve got confidence that if we get service back, we will get the consumer takeaway.

And so we got service back to 98%. That’s good. And the fact that the innovation is off to a stronger start this year, actually stronger than what we had last year. So we had a very strong innovation performance last year in terms of not only customer acceptance, but the velocity of that innovation right up to the point where we pulled our merchandising, particularly in Frozen. And so it’s good to see the innovation out of Gates this year performing even higher level in terms of units per store per week, velocities, things like that.

So that’s a positive. And between that and the plans we’ve got calendared out for the balance of the year, I think the outlook is prudent. And we’re pretty optimistic about building that momentum that I talked about with Dave Palmer a few minutes ago as we move through the year. Specifically, this is a horses for courses annual operating plan that we’ve built. There are some businesses where we’ve planned out the year to invest to drive volume growth, specifically frozen and snacks.

We’re seeing movement in the right direction there. I expect to see more of that as we get to the back half. There are other businesses that we are facing more acute inflation because of things like in play tariffs, where we’re taking more inflation justified pricing. There, it’s about dollars. So between the volume plans that we’ve got and the dollar plans that we’ve got, I think it comes together and puts us in a prudent position.

Matthew Nysas, Head of Investor Relations, Conagra Brands0: Okay, great. Thanks. And that’s a good segue to my follow-up, which is, as you think about implementing tariff related pricing, which is, I think you said will come on late in the second quarter, Have your views on elasticity and the expected elasticity changed at all, just given you’re still seeing some value seeking behavior with the consumer? And if we just think bigger picture around the macro, the consumer is going to be seeing a lot of, it seems like inflation driven pricing start to roll in around the same time? Thank you.

Sean Connolly, CEO, Conagra Brands: Good question. We track elasticities weekly, and we’ve kind of built in a historical elasticity expectation in categories as we built the plan. Specifically, what we’ve seen is within our categories, Conagra’s average elasticity is a bit better than our competitors across channels. And then further, at a company level, if you look at just total pricing versus total volume change, you’ll also see that our elasticity has been a bit better than most peers over the past year. So I don’t feel like we are assuming anything heroic in terms of the elasticities going forward, even in the face of the pricing actions that we’ve got.

Matthew Nysas, Head of Investor Relations, Conagra Brands0: Awesome. Thank you.

Unidentified Speaker: Thank you.

Conference Call Operator: Our next question comes from Max Gunport from BNP Paribas. Please go ahead with your question.

Matthew Nysas, Head of Investor Relations, Conagra Brands1: Hey. Thanks for the question. Sean, I’m I’m curious for an update on the the value seeking behavior that you’re you’re still seeing. It’s been a few years now. So I’m I’m just wondering how you see this cycle playing out and then how you’re positioning ConAgra to to come out of this cycle in a in a better place.

Thanks very much.

Sean Connolly, CEO, Conagra Brands: Yes, mean, it’s I think you’re probably hearing the same thing from just about everybody in consumer packaged goods on this. Is kind of this barbell economy where you’ve got higher income consumers that are showing more resiliency and they’re still spending. You’ve got lower income consumers across different age groups that are being more discerning. They are absolutely doing what they’ve got to do to kind of maximize their household balance sheet. So we’ve got to deal with that.

But clearly, there is more value seeking behavior that is evident in the lower income group. So our job is to give those consumers the value they’re seeking. And with the portfolio scope that we have, there are a lot of great value choices. And that’s a big part of why sales are improving and so are share. So going forward, we’ll continue to put that value lens on our innovation and marketing effort because it matters.

And if you weren’t seeing this kind of behavior, I think if you look at our innovation slate over the last ten years, you’ve probably seen it skew toward more premiumized products. But when you have a large cohort of consumers that are value oriented, you take a different lens around your innovation for both price pack architecture and the kinds of innovation that you want to deliver. Why? Because the benefit of superior relative value is a benefit that’s going to move the sales line. And so you should imagine that we not only have a good slate of great value offerings already out there, but it does inform our innovation pipeline going forward to make sure that we’ve got products that are very provocative, not because of maybe an ultra premium benefit, but because of a value benefit.

Matthew Nysas, Head of Investor Relations, Conagra Brands1: Great. And then as a follow-up, it was it was nice to see service levels get back to 98%, and then that enabling a recovery to some degree in in quality merchandising and improved volume share performance as well. As we look to the remainder of the year, is there any color or guardrails you could provide on how you expect your promotional levels and your volume share performance to progress from here? Yes.

Sean Connolly, CEO, Conagra Brands: I’ll point to some data that I shared last quarter, which is if you look across the group, and specifically the near end kind of center store peers, what you’ve seen is that promotional levels in terms of percent of total volume sold on promotion has kind of migrated back to just about pre COVID levels. It’s uncanny. It’s almost pre COVID levels company by company. And so we’re a little lower than that because we’re recovering from supply interruption. But moving back toward that.

But I have not seen promotional levels go above that kind of pre COVID norm. So that’s a positive sign, I think. And then the second metric we track is kind of depth of discount. Are we seeing this more broad based desire to have a return to volume growth now leading to deeper discounts? And the answer is no, we’ve not seen that.

And that’s been that way for several quarters running. I And think that’s positive, because I think what it shows is that it’s a rational environment. Everybody is, to some degree, investing margin in the service of volume. And I think that kind of keeps your feet on the ground here. So it’s been a rational environment, and I think there’s room for us to do more in terms of merch.

We’ve moved back in the right direction, but we’re not back to where we were. But obviously, do it in a very rational way. So that’s our intent.

Conference Call Operator: And our next question comes from Scott Marks from Jefferies. Please go ahead with your question.

Matthew Nysas, Head of Investor Relations, Conagra Brands1: Hey, good morning, Sean, Dave. Thanks so much for taking our questions. First thing I wanted to ask about, coming back to some of the recovery of the supply chain disruption from earlier this year, you’ve spoken about obviously recovery in your own service levels, rebuilding of your own inventories as well. Wondering how you’re seeing it from the retailer side in terms of their inventory levels relative where they were prior to the disruption on frozen vegetables and some of the chicken products? Thanks.

Sean Connolly, CEO, Conagra Brands: Good question, Scott. It’s probably not a lot of drama in the answer, though. We’re not seeing anything particularly noteworthy. So I would say pretty typical and nothing that I can report that would really be of any real news. Anything you’d add to that, Dave?

Dave Marburger, CFO, Conagra Brands: Yeah, no. When we use the term service levels, they’re very specific metrics in terms of where they are with their levels and inventory. And so customers are kind of back where they need to be, generally speaking.

Matthew Nysas, Head of Investor Relations, Conagra Brands1: Got it. Thanks for that. And then follow-up question just on some of the chicken facility modernizations. I know you made the comment that you’re still expecting the baked chicken facility to be completed in Q2. I think you’re still working through a fried chicken modernization that’s expected a little bit later.

How should we be thinking about maybe cadence of recovery of the margin, let’s say? I know you spoke about some benefits in H2, but just trying to gauge how we should be thinking about the restoration of margin from that perspective? Thanks.

Sean Connolly, CEO, Conagra Brands: Sure. Well, the baked chicken project is that’s the one we kind of started with. So that’s farther along. And then the fried chicken is kind of a newer development because the demand for fried chicken has just exploded in the last couple of years. And we had tremendous success last year with our banquet Mega Filet.

So that’s an investment that will go on a little bit longer. And in the meantime, it’ll be an investment that moves some of that production out of house, which has kind of a double whammy in that we lose the absorption of not producing it ourselves and we pay a tolling fee for that. But that’ll correct as we go forward as well. So baked comes on first in terms of the benefit, and fried will follow that. I mean, the good news here is we sell a lot of healthy meals in frozen.

And these days, the ones that contain protein are the ones that, not surprisingly, we’re really buying. Unfortunately, it’s also been the inflationary part of the basket. So we’ve got that’s where we had a decision to make in terms of what are we after short term, volume or margin. And we fundamentally believe that the best thing for the future cash flows of our frozen business is to keep that consumer pull strong and keep our market share strong. And that’s why we’re investing some margin in short term to really get that volume cranking.

Matthew Nysas, Head of Investor Relations, Conagra Brands1: And

Conference Call Operator: our next question comes from Tom Palmer from JPMorgan.

Unidentified Speaker: Hey, thank you. Is round two here? You can hear me?

Sean Connolly, CEO, Conagra Brands: We got you, Tom.

Unidentified Speaker: All right. A third Palmer on the call. I wanted to just ask on the timing of inflation and kind of how it plays out over the course of the year. It’s I think from the materials, seems like to start off the year, maybe it was a little bit favorable to that kind of 7% plus. Is 2Q, just given what we’re seeing with protein, maybe heightened?

Or just, I guess, any help on kind of the cadence over the next three quarters as you see it today?

Dave Marburger, CFO, Conagra Brands: Yes, Tom, it’s Dave. The Q1, the real favorability there was for and timing on tariffs. The core inflation was kind of where we thought it would be actually a little bit tad bit higher. So when you kind of look at Q2 through Q4 and you look at overall inflation, it’s pretty consistent from a percentage perspective to the full year guide of slightly above 7%. There’s no material change in the year on year percentage of the inflation.

Conference Call Operator: Okay,

Unidentified Speaker: Understood. And then Sean, I just wanted to kind of clarify, I guess, one item. And I know it’s been asked about already a little bit. But it seems like you are seeing benefits from promotional activity. But at the same time, as you have kind of taken some pricing initially, maybe you noted a little bit lower elasticity than you might see in the past.

I mean, look, I get some of this is maybe we’re talking about different products where these two are applied. But I guess in the current environment, are you guys kind of baking in that one of these two sides shifts a little bit to converge?

Sean Connolly, CEO, Conagra Brands: I think what we’re baking in, Tom, is that as we roll out our innovation and our marketing support, including our advertising and our major merchandising events click, we’re going to have the kind of consumer pull that we’ve seen in the past. So that’s on the more volume oriented businesses. And then on the more dollar oriented businesses, I think we’ve baked in a historically accurate elasticity level. Usually that’s around a minus one. And we have not seen any elasticities to suggest that that is an overly optimistic point of view at all.

So I think in total, the outlook for both sides of the horses per courses concept is that it’s prudent. And I expect good consumer response in the areas where we’re investing to drive volume on frozen snacks as the year progresses. And I expect there will be an elasticity effect on canned goods and some other things that we’re taking price on. But they’ll be they should be fairly predictable effects consistent with history.

Andrew Lazar, Analyst, Barclays: Thank you for that.

Conference Call Operator: And ladies and gentlemen, at this time, we’ll conclude today’s question and answer session. I’d like to turn the floor back over to Matthew Nysys for

Matthew Nysas, Head of Investor Relations, Conagra Brands: you, Jamie, and thank you all for joining us today. Please reach out to investor relations with any additional questions. Have a great day.

Conference Call Operator: And ladies and gentlemen, with that, we’ll conclude today’s conference call and presentation. We do thank you for joining. You may now disconnect your line.

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