(Reuters) -Conagra Brands Inc raised its full-year profit forecast on Wednesday, as the Slim Jim beef jerky maker bets on price increases to shield its margins at a time when demand for its frozen foods and snacks showed signs of weakening.
Packaged food companies have been raising product prices to limit margin pressures from elevated supply-chain related expenses as well as higher costs of packaging, transportation and labor.
These price increases have boosted profits at Conagra, which is now also benefiting from easing inflation in commodity prices including those of meat and other proteins. The company’s gross margin rose 325 basis points to 27.2% in the reported quarter.
However, higher grocery and food prices have forced some consumers to trade down from branded packaged food products to cheaper, private-label alternatives, denting sales volumes at Conagra.
The Act II microwave popcorn owner saw a 9% fall in total volumes in the three months ended Feb. 26, its eighth straight quarterly decline.
That prompted the company to trim the top end of its annual organic net sales forecast to a 7% to 7.5% rise, compared with a 7% to 8% growth estimated earlier.
Shares of the company, known for brands such as Birds Eye and Duncan Hines, fell marginally before the bell.
Credit Suisse analysts have also warned that Conagra sales could decelerate faster compared to its peers in full-year 2024, owing to the company’s exposure to price-sensitive, lower-income consumers.
Conagra said it expected fiscal 2023 adjusted per-share profit between $2.70 and $2.75, compared with its prior forecast of $2.60 to $2.70.
It reported third-quarter adjusted earnings of 76 cents per share on net sales of $3.09 billion, above estimates of 64 cents per share on revenue of $3.08 billion, according to Refinitiv data.
(Reporting by Anne Florentyna Gnanaraja Sekar and Deborah Sophia in Bengaluru; Editing by Rashmi Aich)