Conagra Takes $968 Million Writedown in its Second Quarter

Conagra Brands took a $968 million non-cash goodwill and brand impairment charge in its fiscal second quarter, “primarily driven by a sustained decline in the company's share price and market capitalization.”

The company’s stock started the year at $27.67 a share but has been below $20 since early July, and on the day the second quarter financials were revealed (Dec. 19) was $17.35. It had been consistently above $30 until October of 2024.

“Obviously we’ve had a sustained decline in our stock price and market cap[italization]” that necessitated the adjustment, President/CEO Sean Connolly said in a call with financial analysts.

In Conagra’s second quarter, which ended Nov. 23, sales were down 6.8% to $2.979 billion (compared to $3.195 billion in 2Q24), operating profit was a $598 million loss (compared to a $403 million profit) and the net loss was $664 million (compared to a $285 million profit a year earlier).

“As expected, the macro environment remained challenged, with a few new twists emerging this past quarter,” Connolly said. He later elaborated: “Consumer sentiment remained fairly weak in Q2. Household budgets continued to be strained, and value-seeking behavior persisted, with these pressures weighing most heavily on low and middle-income consumers.

“We also saw some unanticipated dynamics this quarter, many of which we expect will be timing related. The government shutdown spanned about half the quarter along with the related pause in SNAP payments.”

All four of the company’s reporting segments contributed to the bad news:

• Grocery & snacks decreased 8.5% to $1.2 billion in the quarter.
• Refrigerated & frozen decreased 6.5% to $1.3 billion.
• International decreased 5.4% to $230 million.
• Foodservice decreased 1.3% to $288 million.

Overall, the 3.0% decrease in organic net sales was driven by flat price/mix and a 3.0% decrease in volume.

For six months, sales are running at $5.612 billion, 6.3% behind last year’s pace, and net income is -$499 million compared to +$751 million a year earlier.

Connolly added, “Based on our first half performance and everything we’re seeing in the marketplace including underlying consumption trends, inventory dynamics, and our robust investment slate, we have high confidence in our plans to deliver a return to organic net sales growth in the second half and are reaffirming our full-year guidance.” Which is:

• Organic net sales change of (1)% to 1% compared to fiscal 2025
• Adjusted operating margin between ~11.0% and ~11.5%