Today ConAgra Foods, Inc. (NYSE:CAG) is providing a revised financial outlook for fiscal 2014. Previously the company had expected diluted EPS of $2.34-$2.38, adjusted for items impacting comparability; the company now expects diluted EPS of approximately $2.22- $2.25, adjusted for items impacting comparability. The revision largely reflects a longer-than-expected timeframe to restore the Private Brands segment to planned levels of operating profit. The revision also reflects weaker-than-expected volumes in the Consumer Foods segment, primarily for a few key brands, as well as margin pressures in the Commercial Foods segment driven by customer mix challenges and poorer-than-expected potato crop quality.
Gary Rodkin, CEO of ConAgra Foods, commented, “We are intensely focused on improving our business. It is taking longer than expected to stabilize the performance of the Private Brands segment, which has been below plan because of pricing, sales force coverage, and customer service issues largely resulting from restructuring actions taken before we bought that business last year. We view these as near-term issues only, and remain fully confident in our private brands strategy and the growth opportunities resulting from the recent acquisition of Ralcorp."
Rodkin noted that in the Consumer Foods segment, the company plans to stabilize the performance of a few key brands in fiscal 2015 by continuing to optimize promotional and merchandising activities through a focus on core heavy users. He also noted that the Lamb Weston potato operations (in the Commercial Foods segment) have experienced continued margin pressures in connection with an ongoing customer mix shift resulting from the loss of a major foodservice distribution customer last summer. The recent potato crop quality is also lower-than-planned, which is also negatively impacting operating efficiencies and margins. Performance in that segment is expected to improve in fiscal 2015.
He continued, “These challenges have made forecasting fiscal 2014 very difficult. While the challenges this year have been unfavorable surprises for our investors and our team, I want to be clear that nothing has changed with regard to our conviction about our long-term potential and EPS growth prospects. We have a rich pipeline of synergies resulting from last year’s acquisition of Ralcorp. The synergy capture is on track, and we expect it to play a key role in driving strong long-term EPS growth.”