ConAgra CEO Discusses F1Q11 Results - Earnings Call Transcript

This is a stronger ConAgra Foods, and because of that fact, we are very confident we have the foundation including robust innovation, marketing that resonates productivity, and the brands to generate solid earnings growth this year.

Let's talk more about this quarter, starting with the macro environment for Consumer Foods. Our Q1 represented a very challenging marketplace. The strong, deal-seeking mindset consumers developed earlier in the recession has become the new normal. As consumers continue to tighten their purse strings and whittle down their pantries, retailers and manufacturers have discounted more heavily to re-energize sales.

We saw softness in some of our key categories despite higher trade costs which impacted our margins and profits. This downward turn in the market environment exacerbated a Q1 that we had planned to be our softest comparison for F '11. We planned for a softer Q1 because of the following factors.

One, the potato crop issue I already mentioned; two, our net cost savings, meaning productivity above and beyond inflation would be skewed to the back half of F '11 versus the first half of F '10. And three, our Consumer Foods new product introductions coming late in the quarter compared to last year when they were launched just prior to the beginning of Q1.

This meant we absorbed the expense this quarter but not the volume deficit. Because the negative impact of these three factors are specific to Q1 and because our SG&A costs in the back half would be lower, we have a high degree of confidence that our results will improve significantly, particularly in the second half.

So how will we navigate in an environment like this one? In a nutshell, our focus is on bringing value based innovation, the right marketing and promotion strategies, and accelerating productivity. We understand the changed marketplace, and our portfolio is capable of succeeding in it.