Pity poor Chef Boyardee.
The 86-year-old canned pasta brand was singled out by ConAgra Foods (CAG) as the main culprit for the packaged food company’s underwhelming profit for a fourth quarter where nothing seemed to be going its way.
And ConAgra said in a warning to Wall Street that its expects “continued profit challenges” for Boyardee as well as its other retail brands.
ConAgra, whose other well-known brands include Slim Jim, Orville Redenbacher popcorn and Hunt’s ketchup, said it missed its own profit estimates because of a 7% volume decline in its consumer foods business. What’s more, the company had to offer “price concessions” to entice reticent shoppers, further denting its profit prospects.
ConAgra had previously told Wall Street it expected to report an adjusted profit of 60 cents per share when it publishes its full results on June 26. It now expects that figure to come in at 55 cents.
More problematic for the company is that its consumer foods business, its biggest unit, is not the only place ConAgra expects problems to persist.
ConAgra’s issues also extended to its private brands business, which it had hoped to be a big profit machine after it bought Ralcorp for $5 billion last year. Here too, ConAgra found itself having to offer price concessions and is now undertaking unspecified initiatives to fix its margins. In February, ConAgra lowered its outlook for the fiscal year that just ended, saying it was taking more time than expected to turn its private brands segment around.
Still, ConAgra said in its press release Wednesday morning that it expects its private label profit to be “below original plans for the next several years.” During the economic downturn, U.S. consumers flocked to store-brand items. But as the price gap has narrowed between the national brands and the store brands, that trend has waned.
ConAgra CEO Gary Rodkin said he expects accelerating profit in the next two years as savings and synergies from its acquisition of Ralcorp start kick in.