Slow Sales at ConAgra Eat Away at Profits

Con Agra Foods missed consensus estimates in its Q1 2011 earnings, blaming tough competition for packaged foods, a “sluggish” environment, and strangely enough, inflation. The company reported $0.34 with adjustments, or $0.32 per share from continuing operations – analysts were expecting $0.39 per share, or $.01 better than the year-ago period. Revenues were down almost 2.5 percent from a year ago.

The company said inflation blew away any cost savings for the quarter in the consumer food sales category (consumer sales account for 65 percent of revenue). Since inflation has checked in the low 1 percentile for the past three months, this comment invited some head-scratching. (But at least, it’s not the weather again.) And despite more spending on promotion in categories like frozen foods, follow-on sales did not materialize as expected, although a few branded categories grew.

The commercial foods segment suffered from cutbacks at restaurants.

Even with operating profit down by 14 percent for consumer sales and 16 percent for commercial sales, the company increased its dividend by 15 percent to $0.23 per share for the quarter, citing higher expected profits in future quarters (oh, that again).

The stock slipped over 4 percent in early morning trading.

Con Agra Foods (NYSE: CAG)

Sales at CAG continue to decline from last year and there’s only so much that can be squeezed from operating improvements. It looks like consumers are opting out of higher-priced packaged food items in this bad economy. The current stock price stands below its 50- and 200-day moving average. The dividend yields about 4 percent, but the stock looks likely to fall further.

Disclosure: No positions