CAG - Earnings call 2 2024 | Conagra Brands, Inc.

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Operator

Good morning, and welcome to the Conagra Brands Second Quarter Fiscal 2024 Earnings Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Bayle Ellis, Manager of Investor Relations. Please go ahead.

Bayle Ellis

for First for Call. Half thanks Second Conagra and and Quarter Fiscal morning, joining the us Brands Good XXXX Earnings Connolly, and Dave discuss and the our CFO, Q&A. Sean first will call Marberger, for our we'll then our performance, open up business CEO;

those in have achieve. be making included any factors documents the we some will guarantee of with we making faith, our the are good will statements today. about in We while we filed we Descriptions risk And the forward-looking are statements do not SEC. results

reconciliation discussing section the will also impact Sean. items, comparability non-GAAP We of turn period earnings call GAAP Relations adjusted including be and numbers can for to which now non-GAAP the comparability exclude be referenced. in our believes information some management on and the financial see I'll over Investor the for release measures, our items Please website. found the that slides the to

Sean Connolly

Thank happy Thanks, Bayle. call. Good our year. earnings and morning, new quarter you 'XX joining everyone, fiscal second for

second continued the industry-wide and QX the Slide These a call on X. At headlines last that into here shifts volume discussed shown level, quarter's persisted the with consumer behavior on in macro we to U.S. shift pressure start behavior quarter. mix. Let's

seeking retail the cash helped net well frozen that refrigerated a readiness QX. we This loss We our as by business. that half In in while QX, our flow progress as behaviors. purchase understand particular, tactics are is that was More it were half in value-seeking what consumer was EPS in with clear inform of to revert was typical in key will excellent improvement moment. The shop, However, margins and recovery. a on volume investments domestic still as most and our saw trends back brands seeing they inflection to when that volume delivered consumer free more when saw we outstanding some deploying we comes We clear progress segment, volume was on frozen actions. solid to to responsiveness in conversion. result back notable

although Our a declines. ] we also productivity volume absorption on remain from impact self our initiatives [ track, saw

half, investment place, look increased to a ahead brand-building to plan and have we in consumer robust confidence reflecting the As second levers. our we responsiveness

momentum a goal to Our fiscal of is share the multifaceted back fiscal consumers of we will I and our enter to position the few then continue move minutes. our build through more as with in on plan in year a strength. action 'XX half

our in expected environment inflation record consumers budgets. reprioritization the last shifts to in adjusted as meals. initial spring reflecting transitory. we for still believe trends begin updating of for said, you was We quarter, that of as we That frozen convenience told This tremendous multi-serve of stretchable as meals. now. reprises behavior those brand of the looking pressured slower We and to to super This resulted in consumer their Frozen we mix a we the effect than the a the quarter. At half been last single-serve saw meals to purchase quarter. be After second the our that lasting didn't pace shifts to inflation strength, U.S. such tide we to appears with behavior strong specifically to time, last cooking time alternatives we these stretch the caused turning. When product unshakable we consistent resilience consumer scratch cycle, 'XX, budgets. did trend are for fiscal both combined After demand additional consumer expect emerge has year. behavior performance Conagra-driven long to consumer face be industry back X years expected, most shifts the innovation of investments of impacted and in has consumers guidance the Finally, cumulative businesses, frozen demand one the our and volume, shift generated our as in the of more second their behavior choices of that discussed our that some case. initially discussed slide be that towards normal stretch But some these shoppers the to food be and a

more quarter, we With that Most noted mind, ultimately to noteworthy invest with increased nationally. high-quality stimulus. where facilitate business, key frozen more our certain behaviors building results in businesses we ramping in before we assess was second it's understand to lifts drove We were to deployed brand to merchandising encouraging meals response XX%. These impact. I share. remarks, did lifts be the important opening largest will our The have process. my gains resume single-serve market very confident up investments the consumer in readiness our the that consumer desired fully believe meaningful up in to typical investments As to shopping want during

combined. I'll you slide, net you also to is can year's impact approached U.S. that brand-building X our this the is consumer are while setting actions. of separately on key can at eclipsing and stretched, on As this really the chart of see last can high-quality not shows investment see is clearly where new XX%, attention they both QX your yet a Slide positive, segments still see trends, business volume this you underway. to And share retail in look results draw responding and gains stimulus. the while our record. volume our the in when left, progress you The

This compared investments, these minus of but all domestic also volume & coming volumes Grocery to targeted XX% sales the and the Canada which in back, that was net team's result resonating approximately cut to in expanded line revenue. with grew businesses, a in way our minus first quarter for Overall, including two improved a International continue in in organic net quarter, strong X.X% QX first International Mexico deliver markets, from the second Refrigerated the our XX.X% went in quarter to and Mexico. of customers volume Snacks. segment by while & in Frozen momentum organic half As quarter, X%. report largest sales execution total progress. I'm X.X% our brand growth of helped QX not to together investments account the our distribution total with activation, is decline the in that outstanding our delivered innovation good international in pleased and retail we point-of-sale performance, result above Foodservice

as business distribution portfolio, in of reflecting results, was business. Slide year. Adjusted which of points quarter, versus associated approximately operating price points our year, is sales the Foodservice of to organic XX% which down X.X% total approximately for X.X% XXX from XXX down gross Adjusted compared to delivered XX.X% roughly Our share as our of sales adjusted volume billion, now last half XX.X% growth quarter including organic down per was consecutive targeted driven And and well last compared was down basis volume quarters impact accounted net the of margin last expanded Mexican $X.XX margin absorption investments of details $X last basis our our frozen year. second Foodservice, decline. earnings in by favorable has net mix delivered four we XX growth. In of largely the with year.

cash the can ratio We cover Xx delivered in this half Dave in X.XXx see But we our down pay flow during almost XX, in bringing was was the that 'XX. debt, 'XX you first it to of of free Slide free more half what Importantly, the cash leverage as net of detail on in flow fiscal free cash strong fiscal second will first shortly. second some used the quarter. flow quarter. to

on earlier, in of year, efforts. consumer mentioned have for On responsiveness Birds we Eye, Healthy our confidence XX, can biggest our Jim. including new brands, investments robust advertising images I plan and and place multifaceted from to As our in second the Slide reflecting you a our Choice Slim half see the investment brand-building focused

You Randy long-term Slim Savage. Fiscal building "Macho and one may and slates we've work biggest of the is our the our Man" yet. seen Jim awareness terrific on 'XX already of this WWE, partnership have with with built-in some heritage innovation Wrestling Legend year done of the

support meaningful XX other If Slide increases launched. we've lovers We have the the call, Chili. innovation exciting those Chili in our sales recently year. we prior slotting, of any the launches are some on with Wendy's I versus recommend backing highlights in-store and highly

restaurant the true get Chili at of can this home. taste You beloved

highlights investments Finally, Slide merchandising. XX the we're in making high-quality

the new reengaging The that innovation. in both focused and going the brand-building capture drive half into the the Our investments well our our of the in investments second efforts on 'XX, introducing year. for XXXX. We're give half second will to fiscal during year we as confidence multifaceted products, quarter environment share as consumer reflecting brand momentum additional consumers the with made to of the updating consumers are investments us our targeted guidance our existing market second

to plans, pass more call net shifting consumer continue in our between in between we and that, and detail. navigate decrease the organic to X% adjusted includes to X% approximately the agility guidance $X.XX. Overall, Dave sales EPS With new and this margin 'XX, as to remain I'll operating and we fiscal adjusted $X.XX XX.X% brands, environment. people of confident over Our compared cover financials

David Marberger

pressured net XX were Sean, we Slide our navigate sales our mix. In and executed consumer the continue $X.X good results well team Overall, quarter. to our QX, as that Thanks, everyone. shifts highlights morning, billion. and from behavior volume

reflects this in a from organic driven lower net earlier, X.X% primarily Sean decrease As year-over-year discussed sales, volumes.

discussed. a sales by performance just inflation. the and joint tomato-based increase contributing investments sales an a selling taken decrease diluted price operating delivered in X.X% dynamics and offset Ardent impact solid this adjusted increased which increase in was given net $X.XX in profit increases the strong row decreased our quarter. Adjusted dollar an mix macroeconomic the by operating sales was Further organic X.X% by driven adjusted on our lower Amid lower to in decreased of per of X%, We the the challenges per The the share. Slide decline percentage net net strong income decreased offset and reflects consumer provides venture. an year QX continued delivered million the QX. versus high partially was positive items. decrease X.X% quarter for offset equity Mills primarily by profit $XXX or in from second in investment. This continued adjusted strategic higher rate unfavorable made trade partially breakdown in profit, quarter the by productivity decline products was a EBITDA of price the of volume margins sales organic gross increased flow as gross these trade in EPS X.X% goods from and of third unfavorable during change where the net leverage, driven and driven by However, investments, along cash largely impact inflation by brand cost Adjusted we earnings initiatives improved. sold operating with is prior free a XX quarter broader our mix period during unit the

We which a for net of small outlines foreign reflected X.X%. Slide from exchange, each QX. segment is in sales also the in benefit decline saw line performance top XX our

in we that sales domestic strategic our investment retail discussed the down from organic While were segments, targeted volume benefited sequential progress earlier. net delivered Sean

QX We our momentum X.X% in Foodservice the International QX respectively. Slide of organic growth X.X%, continued and strong also bridge. delivered shows our adjusted margin and segments, XX which

investments which decline our overhead volumes. While These a X.X% absorption reflects mix was our of in and Cost by during initiatives the price retailer drove lower was track, inflation on impact headwind, of for the the gross margin combined our productivity sold of factors the affected was the continued goods period. margin headwind adjusted a remain negatively made X.X% quarter. from

Our margin benefited operating QX. favorability from for adjusted XX small & and segments details SG&A. Slide segment Snacks A&P in Refrigerated margin to margin year-over-year our the just & drivers by discussed. I both Frozen decreased Grocery due our Adjusted margin performance in operating and

to higher Snacks & comparison points & which and by a both rate productivity both were than sales Foodservice Foodservice Refrigerated segments and Grocery the year benefited included are improvement. Frozen. points, driven as our showing basis We XX organic higher margin XXX net segment's our prior expanded also disruptions. consistent impacted inflation expanded supply adjusted pleased Although chain at that adjusted QX, operating from basis operating International segment margin

earnings displays prior This interest and the lower compensation the second SG&A the partially adjusted Our from versus our quarter was timing free prior XX A&P QX expense, the Ardent $X.XX the cash decline the flow pension in in expense. A&P and increased slightly in profit and we driven leverage net first incentive quarter, related, and the increase expect equity in adjusted A&P performance EPS year. Slide significant income on change primarily as to spending SG&A along half ratio. investment below the of $X.XX, offset in and made reduction was was Mills. with higher by progress decline was primarily by adjusted we gross half The method year and

Over XX%, the $XXX million of past 'XX, half rate we delivered approximately free rate half the the cash improvement of five first conversion years. with a over flow fiscal highest a in conversion first

and directly to focus on contributed levels these in Our managing accounts inventory strong results. payable improvement

strong reflecting years. Mills the the we last from had flow quarter, Ardent Ardent addition, distributions cash and the performance of In strong in Mills profit second few cash

strong million deliver period. debt leverage reduction At of over debt Our ratio flow than last the months. was of free the X.XXx, QX, reflecting the XX us our during cash helped has more $XXX repayment end net

We prioritize continue leverage Xx. as not to debt fiscal to prioritize in expect we we down Looking paying the our repurchase ahead efforts our any the debt quarter to long-term continue 'XX, we year. of of reduction as fiscal chose target remainder shares this to

to continue optimize to the progress use will fiscal best of value the We as through shareholder evaluate capital year. we

with between fiscal net organic and through compared adjusted our 'XX $X.XX. in approximately to expectations including back EPS the to for of slower the XX.X% the As pace and 'XX mentioned, of operating half. additional three volumes margin Slide and our to are investments guidance we fiscal and half reflect X% key year. recovery second to metrics, results, of for the XX year-to-date brand $X.XX our Adjusted expectations volume decrease sales outlines between for our continuing improve the X% updating

walk guidance. to like behind to XX, the our to considerations through and I'd Turning a minute take assumptions Slide

of We fiscal expect rate remainder fiscal for net of the an X% year, inflation to moderate through approximately the inflation 'XX. resulting in

starches, Regarding are inflation are that our X% rate, and there are areas pricing, at we and such dynamics the our inflationary outlook. few average. are areas and up With resulted highly actions as deflationary price are that a above which seeing in estimated average dairy, currently the are which still play. inflation-justified pricing edible in have both such oils dynamics pass-through select included below as and These reductions tomatoes

to with support versus these expansion half. We on in approximately down prior fiscal million will second anticipate in investments 'XX that and expect price dynamics, CapEx in investments priorities mix with spend increased we half make growth our result $XXX now and We combined year of being capacity to our automation. second focus the continue as productivity a

'XX. we to productivity to result, gross approximately expect by continue the savings of a million As achieve $XXX end of fiscal

We higher rate expect due a approximate $XXX debt. expense outstanding to primarily interest interest average on to weighted million

due While expect its performance. to Mills expect income, we bottom contribute benefit to line do pension $XXX not Ardent to million we any from to strong our approximately continued receive

tax year approximately estimate full Our rate remains XX%.

track further reduction we As debt remarks efforts you term, for to for remain today's I our reduce our I'll discussed, prioritizing it pass concludes half. the end second net operator and to on questions. back leverage for now outstanding we expect ratio to are in 'XX. debt the net to our open Xx call. of the listening. Longer prepared our line the That target by fiscal reach Thank

Operator

first from [Operator question Lazar Barclays. Andrew Instructions] come of Our will

Andrew Lazar

where And think Sean, investment that volume improvement. I for whole, as a then would right, to price -- get there to impact know of of point building has could sort profiles. group that it for margin more of concern the start ultimately greater need investor the deliver been to be a sort negatively sort I I could

margins sort being of environment? than, competitive the So to rather being that say, question and how be expense the disrupt or ROI made of my flatter spent the I comfortable sort broader money of volume let's we are at simply is, investments guess can value-enhancing

Sean Connolly

over now expand merchandising spans by there way, in that did room innovation more advertising, words, This and heard investment, remarks, chain to Andrew, Conagra's everything around from key our operating in that merchandising, we've is an out not plan we support mindset supply support how ago. that to key about clear quality, as prepared respect Number very the merchandising we not very high a Well, you are one, operative in worked three, ROI different especially humming to there I is are decade windows, hard think what more. has think, was Number on be and of a last and today a we return terms multifaceted with two, we in on years, me around doing X and know, we our company merchandising margins the and frivolous. Number I've brands. consistently get we've support, of let being very do. as investment again, in brands do our high-quality pointed you got what got

peers I'll merchandising part It's the our years, is of last where strategy. The overall is ROI more that depth terms the discount understanding reasonable. remarks, that more heard our QX. of to behaviors liked make several our what you are levels Our a with in and that saw. we over extremely of was typical frequency been, important is and in their reengage below mindset point purchase is readiness we as of test we a last bit it in And consumer

it's kind fiscal you this up to invest plan consumers, set responsible second merchandising of engage of in from build to momentum we in. advertising. that's I for question. terms that response a I everything the to the half the to think I'd with very But activities give And So 'XX to of types up ourselves again, smartly think and of in a deliberate nice be all adds

Andrew Lazar

started consumer that behavior you assumption, initial what are then improve. behavior by anyway, of now, of consumer out now timing stage? by was think, sort guess been the I that terms as bit. about, consumer And have would And was of assumption to into the talked new behavior embedding a this the that in you has guidance at seems your I pushed it or

Sean Connolly

Yes. Great question.

volume about to algorithms, to invested all where get would very And And environment where as the we've for we in the significantly, growth tracking your that's consumers. deck, picture. ASAP. But Here's on have declines focused trends and are before volume can particularly macro them Yes, volume to saw yes, big you the group trends like than to into we we how simplest challenged our growth, expected. you the and lapsed volumes on think have been back why a bit get has have you improved return sunset those in longer to sense, reengage base.

trend Conagra's of fact, In the in better group. bend QX the been one in has ones

we we for major the we So given without is macro further easier or where be huge signing associated and that the the are not question, will fully way fiscal the anything increase expect HX, second approach deliver build saw the momentum, toward heroic. HX describes as juncture half. consumer answer in are sunset at the up goal comps in But kind the I 'XX volumes to signing and to on clear and that volumes. along the a best this in response to up we've volume got The make for improvement think in we investments declines back we growth in of QX, sure banking move we we that And are. your

Operator

next of comes America. Peter from of The question Galbo Bank

Peter Galbo

not decline how there of to dimensionalize a pass-through of bit pass-through about really of incremental retailers? into half incremental think price of relative the year, quarter just investment, the is Dave, that investments but maybe mix component nature. any the making you much -- Is mix, and spoke to way only just you're commentary the at the the more on price just elaborate some back the around kind your also both in some I of

David Marberger

Yes.

try and of some mix, unwind let me to color Let give start kind the price me you QX. with

that. mix for the of price there X.X%. And was our minus So quarter several were dynamics

pass-through Domestic if -- business. in pricing tailwinds, was which that tomatoes. we did take We have we pricing still high partially business. our in have I as some by spreads our Foodservice international retail inflation our pricing. We offset we So have you in pricing basically our start did some mentioned, other businesses, with took in and oil-based is tomato We

So when you net those actually together, tailwind. pricing a was

mix. was it positive in price So that

in pretty talked large of other quarter. slate was was about the significant in Slotting about was slotting. investment investment basis of It The year-on-year our remarks. XX to we component prepared points innovation, support this which

was And a negative was selling that is mix. sales piece quarter this higher our lower Another unit simply per percentage dollar this of item.

on timing to to But sales the a thing, [indiscernible] a pie, like So year, mix. it can Peter on pot course work negative that flip sales just for over higher a example, banquet is sales so positive for a quarter-to-quarter, a little tends That's out. meal lower multi-serve of little the that or negative. relative a

quarter. And in negative trade And then investment. investment and than less this the second was remaining that the that was piece the the merchandising for So is quarter. slotting

there in that to price expect mix half Those lot impact would mix a the that X.X%. there's the trade of kind in expect second merchandising in to the gets We much are more increase same. negative So I from the do we that and pretty half, less dynamics investment. and second comment be in did down.

half in more that saw price little QX, directionally mix, but a area. second down little the bit in than will be bit we it a So

some that you on So color gives hopefully, that -- price mix.

Peter Galbo

down. like with [ ] least And kind comes leverage that have maybe has due leverage The secondly, guys, at the the on then you earnings May. the piece, coming stabilized, bomb in just but of

about as are $X refinance out thinking how of we you Just paid [ at kind relative point forward on go that ] debt to billion this here?

David Marberger

all we're we looking our always our at have Obviously, a options. paper, have commercial of of so we lot liquidity. Sure.

was cash half. free the deliver cash in As flow this really saw Usually, very first company, flow in don't our free the strong we strong. you half, first

half we all strong well. had very we working in usually half. our very second cash free as on second very the focus first coming expect cash is to distributions, be Well, free half. conversion given strong with a cash the And the flow Our and flow Mills capital low Ardent

the flow. So us bonds where come May nice due, a when in it to have strong cash puts going we're free position

best use our what's And markets watch our then it We to very we some we look them have and commercial see seem we'll rates there's to Maybe repay cash always opportunity But so go access our as we at combination. But coming we closely all out we be paper. strong figure the to refinance looking capital options, to and free We obviously, other flow the like all an down. at are down part. if we're to I of at our the look given where options refinance forward. flow. free cash the

Operator

comes The Robert of next Moskow from Cowen. question TD

Robert Moskow

to guess it last it's the what was the with One the I percentage two-parter. it a to of start at for was year. I think sales a of year advertising be as is, guidance grow consistent

guess is, now And the sounds sales keeping that it guide, first question you've so the the same. cut the advertising that does you're I your of part like -- advertising mean that

a that as for the you sales be mean the growth? cut percentage will higher have do that of year? does Or with it the commensurate sales to So A&P

David Marberger

Yes, Rob, different that answer of ways. let couple a me

be look guide, total we in guide That's the when to in expect where at prior our look line you SG&A, with operating were year, 'XX, if at where and year. and approximately we you A&P gross in, fiscal is we So generally margin, you just margin XX.X%. came at look our

where still first want half if were. half at around we there's we though, is again going versus in our little that, to we're be So A&P, to your dollar-wise, lower look a if the X.X%, than if at the looking way up bit look relative And to XX% at that's it, A&P second we X.X% at opportunity question, come spend in to. The if we first we you up second year, were spending half, to half. last is

doing. advertising So it and at the is and rate on what's other been run the we're that to going in to half that Sean the now digital our spend about be of we've just second kind talked advertising looking what support

and second trajectory the So the the we A&P feel half first the good of half. to about relative

Sean Connolly

Rob, it's add point a Sean. there. I'll on just

from our a year, year, we the to in really team the agility beginning as the we saw agility And those of team behaviors As going and the and has the spring. we're beginning typical emerge of readiness are demonstrate have understand purchase part at year the to resume we trying talk this some more to of delivering things about two the to of to piece resilience. the said shifts been things consumer after

And may I that quarter's was assessment so wasn't call, you engage recall consumer on the to last ready our that. quite in mentioned

encouraged in consumer by as So conservative to prepared we we saw. we were going QX confidence of of ready. really these the in in that more in the was readiness some and where And of had really terms deliberately to quite QX deploying fairly we of we year be the what because back were that QX half mentioned our remarks, we wanted dollars tried and those assess kind keep funds for to we

real So bit are their plan. behaviors investment consumers We got of back we've the typical across where more like of a in back nudge year. to got a half purchase for with kind the little this the still half some of lot a dry our fullness from terms willingness multifaceted a reengage we and support of got us of for of demonstrating the sit of now easier the comps we've we've that that powder year, the

Robert Moskow

Got it.

can speak activity a seeing you're promotional lifts Sean, the industry broadly behind seen that Second whether part on lips food sounds is, it overall more Frozen. with you the the broad-based more are and the they're you've basis. retailers about happy very in like with happy

the about dissatisfaction speak certain broadly they retailers big more I think haven't expected. you're the rollbacks from to response the about that of I hear possible it kind Is some seeing? and lifts what that fully gotten

Sean Connolly

spending they're we're large particularly focusing of that. Manwich sacrifice, our We're it, here right? the objective But because to it lifts, particularly trying money convenience super scope categories them. other we pretty our at selective, dollars we look to on way us describe [ They're reasons, where to if We're there get on you Conagra made a a the We really to short-term consumer driving and lifts, sense wants we've where good Yes, Rob, a we business I'll a you ] pick of not we're give they've for depriving on where buy so those stretch the the we and that's like drive budget they themselves, lifts talk their when to or spots. items. category. know trying and sacrificing got out to want at invest

They rice didn't rate, They reduced like So do if like give on stuff. any to of to with look they got the they cook, here for doing of scratch and course been are to make last a buying We're that. assure But it. But headset, such like were got They their spending of cooking, they really where a term. they what short-term they're is like short when years, stretched. want you like over category to on clean, category, things don't buying money beef. things lift of be and some you But saw equal. up that, consumers to they've reengage, and who kind going created trade-offs, do don't again, single-serve product every not in that rate. when do. don't can you basically started the they'll QX, a is summer rather especially they'd on forced to I've buying buying some frozen some that food it stimulus the thing not super bit that's do our give want financially meals at to they they responsive like their stop of beans I you've to the a we when tremendous ground consumers travel, XX in

So talking if alternative where not investments going brand, that's kind of the focusing they maybe it's energy. staple categories are about. or more our not category lift. a kind the we're we're get trading there's events where to a were store down But not you're another a of where of to Those

Operator

Pamela The comes Stanley. next Morgan question of from Kaufman

Pamela Kaufman

for -- guidance your relative expectation the Can half, on color the investment? And of to much the for year? see declines. second the volumes in the behind in How declines mentioned quarter? Can price reduced just the price line is you frame you'll you drivers versus that of give some it greater then your you top second magnitude change a more

Sean Connolly

Pam, it's Sean.

Let me it a it today, just talked over upfront we into flip again macro I mentioned The persisted comment to that quick I'll and Dave. make QX. about in environment QX,

just beginning assumed half at fewer have we've first the would our year. in the than So purchases of we seen

of So the that's top the down call line. part

us be up point half this ]. investors sign it don't is middle the second fairway The [ recovery let's volume be mood kind any of the prudent, the at up because of to back in for let's want of part I of heroic of our is, I year think the

there grand that targets can because some the making behind like assumptions saw are And put the it out Let's any beat. of we second what's not meet quarter. or momentum that's that in we kind we

the for 'XX, really high a outlook momentum. are last focused setting nice [ in exiting is bank second year given of on degree further that year the that's of confidence ]. of to balance what in going driving intention 'XX get at over point, fiscal what we've expect. of and that And every the you. momentum sales right with half, we that Dave, is a we kind have to we have this really up fiscal that And and the we're this We

David Marberger

Yes.

end going organic as as the to mix that slightly comments, the And slightly volume. the the organic. negative Sean guide way is sales then the of based on So continue to on combination to sales, made we net combination track important That's of you a sales HX, net those and comment total second and X% on organic the minus HX, just expect to continue minus that's just our improvement and that of the Pam, two 'XX. to that it of and so year seen time negative of we improvement QX The towards incorporating forecasted the we've get by to X%. combination price we fiscal and if the get that's to growth QX volumes we a implies midpoint mix, be take for half price

Pamela Kaufman

of and reduction operating margins is clarify expenses operating in that of your year. just increased much on And your a then guidance How for more to margin the brand lower the versus for gross investment? reflection expectations

David Marberger

Yes.

you landed in you first the if look we half first XX.X%, at gross where So if margins, half gross the at we were half, second look at gross is margins, I margin. think, our

that. bit should line below with generally a in half that, second be Our little maybe

reduction sales SG&A percentage in as the was HX. it higher So in investment in to a where timing see going margin coming second A&P you're operating the and from being half than the higher in is of HX the of

second So half operating really the that's in reduction margin.

line the we've where and were So operating be fiscal you land full will at year. kind close and of settles And be year, with guided when XX.X% you SG&A, margin. with if the to A&P 'XX. prior in where margin, at That we look to dust we pretty we'll look

Operator

Bernstein. next The of from question comes Alexia Howard

Alexia Howard

in pandemic of terms period over of quarters? I of, to quickly innovation disruption. the is quickly Can was supply you recovering? it How next of innovation I any is Can pace reduced. imagine of also the likely that pick give during I how few on innovation up the chain and ask about dramatically course the numbers guess the during us the pace

Sean Connolly

Alexia. Sure,

to pause on When let the that. we of way, kind ready take asked a hit pipeline fully our do very button had that surprise, a would we the to in customers me our So even pandemic, the convincing back the we pandemic us launch. for To hit not though to got minute. with innovation we us expected

innovation the of group. we you but into the probably highest through peer fact, amount the the so was slowed modestly. it at continue if innovation pandemic, in during only we among modestly And the pandemic, launches look highest to put And marketplace the in or our

didn't was year performance launches we this much expected bigger we biggest overall and TPD we had there per we slate perhaps was productivity It and TPDs. is since when one launch. a And innovation tremendous yet, yet. of biggest momentum the kept way year then. Last the really our our pause So in terms of

when CAGNY. some we'll So share metrics at we're

historically, years. our we've annual called sales. percentage XX we the this a we to Just probably a of of thing is It in And were renewal we track what rate, track hit we probably you X%. years launched over at then comes from of give kind high XX%. the years, three items last ago, which watermark last X

in full for focused you in month category. one because see a so of second so innovation to CAGNY, like major this the yet. pointed player this we've that's both coming the got is customer emerged Wendy's year you highlights frozen materially And back the thing our we'll this and is to Chili again, I XX% depending of And it. snacks a out, be So that also, can of And remarks, in is prepared the as half year. we've upon year business this biggest just has launch that into parade investments, we're the today investments Dave that in the with zero around very marketplace. do our in in kind on ballpark to front we half here, always what of We and hit from and think or XX%, be at fun the slotting some and

to more very for significant So on that come net-net, us but front. a innovation it's year CAGNY, on in

Operator

Capital The comes Nik next Markets. from question Modi of RBC

Nik Modi

quick just So questions. two

going but your occasion freight But is benefit temporary talking I'd rates Sea, the think as love a question. And of on specs Sean, more seems seeing view what no issue just just, the don't just observation mixed should goes of because start or about. depending bag the then in-home to kind drama more seeing that's the want under is It impact, I your in it's thought we year that all in-home. should on the consumer sure meal we're which I if I some through. is versus with consumption, -- Red out-of-home make Just an the like there's the love question the very second coming first it's we're category kind pressure, or you of of

that. your on love So I'd just thoughts

Sean Connolly

All right.

to a for answer group. What's the not even has spending how interesting we've that anything first one, second no not observation is because calendar the the you Nik, if stress positive stretch begin So happens, of decides reduction The sheet. is heroic, very If into see of in how been potential would place assuming mentioned eating. heroic. correct. Part and we away-from-home assume response consumer Should in we're is does further away-from-home see environment at they balance that a make is their their consumer trade-offs to that though that one not tailwind as but us think equal making half year outlook a impact would the need the one That on been probably And yet, first of shift the an that of volume home, the about for has happened place to remains year see some spend who not That is from away-from-home keen is a is away-from-home The is home easy. behavior resilient the stressed back a opposite shifts. 'XX, you anything and very that's in and no, sticky and seen certainly, would I dollars and fairly shift this you there. they've here. assuming challenged the is additional consumers XXX% increase household historically spending. an you're our some for that

Nik Modi

some just or what when about the about within a of with center QSR the on it investments, price what you versus be And goes follow-up is your gaps, frozen the thinking at? think store kind what really of so price on of unit between just sell low-end within you about priced right, are also maybe some gaps you strategic would the that. guys thinking of kind

Sean Connolly

When now of switch The and themselves. reaches burrito coke my first stop a price make the take tend gaps consumer and versus look, too away-from-home point care gotten my the have expensive, go to to they to doing that. say, they

or is it not Second, if at categories. it they on we but this at it's look other buy the hopefully, open that's what's grocery right And buying look products. do as volume just switching, to malleability in they're it an store. and third, our of set, what's could and to But categories meaning the shelf switch then be left our

our because is directly be in Well, behind be, So remarks the that marketplace going things I It business. investing the is now. and comparative right one Eye that today, to are prepared is on going to we're it our an we example would Birds be in running, -- advertising actually advertising is referenced of canned it vegetables. focused the vegetable not you and quality relative worth trade on on a up And while that current down, trade value value be down a message in might simply proposition. environment, in end worse a superior delivering to canned trade-off the is to to it is tempting

a a any example very So really of to thinking in superior section, immediately value. about than thinking And more about that's what's the that an relative where and focus or of where targeted our getting and we're on left consumers given hard-hitting products broadly quality competitive way we're the might in with elsewhere. set after go right

Operator

The Paribas. next question of from comes BNP Max Gumport

Max Andrew Gumport

back gross Turning to margins.

negative super the have the company and to like sizable to with now, these margin. But the to with absorption price packaged price trends line begin cycles played cycle there in post inflationary to start the time a expansion. margin productivity typically the of were mix nuances negative ago, these the partly develop mechanical food how in hold inflation, against gross out it turning increased gross sunset investment, to really mix you trade due is are and Are inflation first So past? year this starting nature around? still to up fighting now Or seems

Sean Connolly

consumer. as something the they it making kick way does with I'll that the shifts. there going started did rep flip after then the start new what mechanical we behavior these should Easter emerging new stuff Dave. work right is always the consumer some with and on was unless saw to Max, it of And something it off All Well,

they assumed the the a way, dynamic that begins right? just would or go the improving embedded and as to wrap that typical mechanics in then by be what back always not the soon wrap either to outright, ], -- of that's typical a why in be. [ So as is right So dynamic of mechanics base the

across on volume looked at why that's So you weeks, group, weeks, didn't you the you focused been quarter, right XX because the XX last through looked when we've X when trends bend these weeks. see

want particularly pretty us, up close speak. to And it bend Now, the that to algorithm, you've set for bend. is on add once then be being Dave, to you kind of you're getting do does, And seen so in anything base. that embedded to to back that?

David Marberger

Yes.

say, is come just in we at to is margin going gross that you margin So XX.X%. margin, fiscal if 'XX. where in pretty you look land? of kind and In are okay, gross guidance where operating We of the guided going landed close to and to it to

going prior are first guidance, volumes had year down year. kept significant we've say, to they're at look gross down a pretty sales on absorption, and year our based down our pricing, wrapped be okay, year right, you that this and because all impact negative and of of when to flat half on we've from margin last we for were you So the

and more volumes absorption being your headwind when you that to start inflecting stable manufacturing be negative to So actually away. them get in goes positive, start

levels. total more So back the which focus to margins flat trade gets investment now is our year we're our we when investment, this we gross year, keep increasing finish this normalized

margins are have and business a it investments have consistent negative back absorption of to our our where lot with going to that's we we're last in a year, So was, where the base.

'XX, we get to can growth. fiscal in So back

to our leverage opportunities cost have We base. some

well it that's fiscal sets have base investment up should and it an be, 'XX. where We for us

a but around, there's just I going at and it. of we're you things that's year, to how when about look lot copter where bouncing the think So you finish up

Max Andrew Gumport

about doesn't category are the category volumes you're that hear the response to means seeing expecting to half. improve to investments. increased really your second about investment just seeing, in response help share in a are investment you same just you quarter really I'm Great. the turning for the what saw are or And then talking other It's that second volumes. companies we good if curious, that fight the favorable and and

Sean Connolly

is interesting Max, -- yes, of prioritized their some I saying is deploying value-seeking every they tactics we're equal seen category. that the And how terms category sheet, had Basically, what what still we've consumer stretch on question. the to there, Yes. balance not impact some categories. in really that, is and has in

that tend that then the short interestingly, tactics serve through us the seeing So over tend like they we from category categories volumes that's in usual, will a time, volume moment, to some the disappear. But than drive improving consumers field or even we softer we've before, to horizon, of their this [ gains But are momentum. whether malleability through they investments gives improved over seen improved purpose what remain ] take frankly, and in via share. share volumes and

going we're both think going to I forward. see

Operator

The next of question comes Wells from Fargo. Carey Chris

Christopher Carey

investment call So and that this promotions are clearly, rightly have discussed topics on been so. well

lot your strong. the you've in investments you fiscal certain in on give or so for I that on detail. businesses, QX expect half. is volumes is far seeing great Are the of get half to the the really in think of QX the back back you lift of into these you which question giving kind you me, question of had to into your sequentially improving uplift on seen quite more and You've the is it quarter sounds fiscal confidence conceptual? just that confidence is have which -- that in volumes and The this the given step-up the a investment year,

So sense? are if makes you it that confidence piece versus the seeing -- more

Sean Connolly

Yes.

QX in saw re-hit help not we'll we behaviors, of deployed are typical that, stick kind the we for I'm was the response evidence us, we we clear in year, half were that if investment We're what second process looking empirical the this of evidence we to We up our in [ me the for. in where of improvement consumer in And with major more on kind QX. the with of response. prepared response. But on we the comment more real of for a planning not course, standpoint, signing reengaging remarks will consumer that banking of macro purchase to Let similar confidence a environment kind because so that QX. got that of of get huge we consumer posture type ] inspired try QX, touched to or on from a do in going

as So of that's in Look, what because one there, kind in recovery this current investment a might we're this be elongated posture is been but we've what interpret return in not bad got on has fair to that the I people conservative. probably volume at. characterization is environment, looking that's we're a think expect. that banking more in But of than

Christopher Carey

just one follow-up. And quick

year? believe, in the item full incentive for for that way comp dimensionalize favorable any the call with mentioned, the it for Is was guidance the fiscal a You that QX. That's to year earlier there SG&A I lower for me.

David Marberger

driven We the SG&A really Yes. almost quarter from comp. incentive delta of and -- all the in was

higher sales net percentage be drove half. So the quarter. second We that SG&A delta to of in the do expect the a as in really

So get ago. percentage it a will of was year our where as net it SG&A a close to sales,

So because QX, you forecast. But be this, in comp prior to a there's can in relative elements some where with it to relates really incentive were the in the variance SG&A. your timing year as especially timing item to can drove it it all it

Christopher Carey

or excluding higher that half, just [indiscernible]? with SG&A is And spending to the clarify, advertising in back

David Marberger

we adjusted that's which excluding exclude A&P -- ]. Yes, [ SG&A,

Operator

any I for This company like over would the turn conference closing back to concludes our to question-and-answer remarks. session. the

Melissa Napier

for Napier. everyone CAGNY seeing we're us at looking call, We you and again the joining Melissa next month. for it's So thank morning this forward to

Operator

has may disconnect. presentation, you conference attending and The for you now concluded. today's Thank now

Conagra Brands (CAG) 4 Jan 242024 Q2 Earnings call transcript