Conagra Brands (CAG) 6 Jan 222022 Q2 Earnings call transcript

Good day. And welcome to the Conagra Brands’ Second Quarter Fiscal Year 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note today’s event is being recorded. to Relations. conference like Kearney to now Investor from would turn over the Brian I ahead, go Please sir.

some everyone. I that making will morning, remind statements Good Thanks you we for will joining us. forward-looking today. be

have found References the impact we those for filed press release making either measures. the comparability with documents comparability of the non-GAAP on the adjusted the we earnings good do Please the are see or we our conagrabrands.com. will which are section including of some turn Relations organic any slides, in Descriptions earnings included our Sean. be financial it release that, items. statements believes about found of While The guarantee achieve. we Also, the website, be non-GAAP factors can items, faith, discussing With in the in period sales additional that to over we SEC. not risk will to to Investor to refer be will exclude information the earnings the for GAAP results in management both referenced. items can I net measures reconciliations

thank for quarter. XXXX be some Thanks, for and and to start by we everyone, joining I morning, remainder the and you quarter the our continues of updated fiscal giving quarter, future. believe context for Conagra well-positioned for year the why Brian. will like second discuss earnings Good our the Dave Today, results that call. you I the our to outlook for

demand our net navigated to continued supply Way team to actions executed our continued to inflation-driven the environment the the We consumer pricing complexity but strong Conagra exceed lower-than-expected that in sales all remained dynamic, and ongoing quarter and First, know, in as anchored elevated you elasticities. external highly and has ability growth the extremely playbook. delivered agile be

than higher the pressure sales also quarter key factors. three our second expectations, was expected net exceeded driven margin our in by While

forecast. anticipated quarter, during while our the elevated than higher First, second we inflation it was

transitory the to and of some costs consumer product investments to And our to we elected to make orders chain the availability we face for continue demand third, outpace that supply, supply service Second, ability related elevated our consumers. experienced to environment. maximize additional current in

We expect second margins pull half the pulled and the the to we a to year result of improve to of as impact in manage levers fiscal the continue inflation. of

savings cost We will always our input inflation. cost programs look offset to to

We the pricing given increases, December. communicated magnitude our in actions additional However, again of to customers inflation-driven the cost also pricing. include

our the are year, but again has we evolved. guidance path once achieve reaffirming For our adjusted to EPS outlook, that

guidance net We increasing sales lower-than-anticipated demand and based our are elasticities. stronger-than-expected consumer organic on

our and of guidance expectations related given actions. We timing are margin also pricing the the the in gross our updating for year inflation increase the

continue to consumer enable together, adjusted with savings elevated deliver cost Taken believe $X.XX. that diluted actions will demand, us of about we coupled EPS and additional pricing to

call. as the jump backdrop, the with today’s that for agenda So into let’s

of half particularly changes behavior, second in detail of the seeing long-term will We with younger potential further will Brands. we our changes the also quarter We of an going for are share before believe consumers. into in year. the on with the outlook our Conagra evidence the more start of consumer fiscal overview these thoughts on structural some I are

Let’s dig into the quarter.

On nearly grew on net by and see by more organic CAGR QX solid results. two-year sales our quarter can EPS slide a As team adjusted than X%. for increased second the basis, you X% delivered seven,

the higher inflation expected these earlier, environment. than noted we I As in operating quarter. in the and cost came of face results a delivered challenging dynamic highly in Input

some demand continue we consumer to to heightened addition, experience. strategic decisions In the made we service

costs labor during ensured we trust and shortages, industry customers to decision important service and As seen transitory our entire deliberate we invest This long-term. and to the consumers, and in could building QX, an The associated customers with food is the building and supply transportation congestion our consumer maintaining across for focused orders. incurred issues chain challenges material deliver especially during loyalty. amid costs bottomline the our the we holiday supply with physical that chose availability season. of on remain supply Maintaining part disruptions industry, the on is

navigating that on our While margins the was negative we are our a these tremendous I quarter, and consumers. resilient better the to our They remain factors be for this dedication. chain to impressed to of our ongoing their to continue agile want the portfolio supply in I been future. team’s positions our am and team. thank and grateful for deliver purposeful impact commitment net I result this us allowing environment, approach for customers take opportunity have our during by confident

building over points. years. was significant household penetration Conagra Total XX.X% share strong Looking new each past this our consumers in broad number up was sales the up double-digit that slide at you see and XX, with basis our on snacks our retail category of based. quarter, increased upon on staples. the XX basis two-year basis quarter two-year growth domains; retail a and performance we two can quarter, penetration up in Household were a domestic the XX also Total Conagra in of second the was frozen, basis points have acquired

rates. penetration consumers acquiring increasing to discover products existing addition incredible demonstrated their new and value repeat tremendous our and our as In consumers, are we household Shoppers our continue proposition. by to retaining

on slide of the coming more. As the chart shows, our keep XX consumers right back for

success Slide a highlights disciplined approach QX. of impact and our key playbook, in the Way XX products to As delivering new modernizing our across portfolio. we execute our to our remains Conagra portfolio the innovation

our year the innovation outperformed results we the second quarter, the in During period. delivered strong ago

in to our snacks, top sauces XX for our e-commerce in than the accounted terms sweet ongoing results. our with larger innovation rose supporting in in innovation connections. e-commerce category continue consumer throughout demonstrates total and pack We in again to launches several marinades, our quarter, e-commerce just in key including did fiscal our the vegetables. e-commerce how categories, growth strong of meaningful entire yield Once frozen we $X of edible investments We more outpaced continued as sales of and a delivered invest to treats, retail Slide first in quarterly We our product deeper, peers. and quality new and of sales again, the XXXX the during second retail strong percentage business overall growth billion XXXX. the quarter and

our and the the first we XX, extent was fiscal driven net pricing actions half actions. growth by favorable consumer our As you pricing slide year. earlier, in strong of demand, mentioned see the elasticities, of inflation-driven On sales elevated can

flows period, the three prices discuss P&L. domains, and domestic this as rose on-shelf During our will the across pricing Dave shortly, all through retail

you As been see of the has to tremendous relative see other products few to will slide value It’s price on fairly low. favorable been options, XX, continue a I Consumers minutes. a in can our to on concept food expectations. elasticity our elaborate

turn path let’s the Now ahead. to

see to of increase This we increases be XXXX, increasing customers. and compared currently on inflation we business. the Help taking actions approximately time our to of actions while our we quarter XX, our and is approximately at first the merchandising slide offset have You incremental expect to to increase, the a call. XX% already anticipated taking XX% health investing these still our large gross can the are Many for pricing we modified of are inflation, announced list been manage in actions, plans. long-term price including fiscal

based pricing and a adjustments of ability lag impact in there inflation is As our to reminder, a inflation. timing on execute the between that

of As year, the go significant the price half into impact with will second the most a during fourth result, the in incremental the quarter. increases effect

step back our While it’s positioned picture. to our focused is it’s The business impact by products. and the long-term the the respond broader success younger big the evaluate consumers uniquely modern quarter-to-quarter believe delivers the on to our to is consumers, we inflation environment take in and portfolio that future. And easy driven how up how Conagra you of get pricing, particularly for keep the when needs caught to of against important of consumer, a

many many opportunity are detailed are we seeing modern given most long-term for especially that attributes confidence structural, in by Conagra’s we to our proving that As represent filled creation. younger consumers behavior significant consumer before, portfolio winning driven is on-trend consumers changes changes these have and be is are times value the by the with younger food with underpinned that

a food. of A and from they they Younger shifting the consumers and at-home. dollars U.S. to food represent spending optimizing eating home, that large money on for they includes growing of part value away population, part the eating from spend large the more optimize their get want

the positioned from believe younger Conagra and away relationship to home trade, are choosing As forming brands superior they are to these is behaviors, brands from compared delivering given consumers they outsized that brands. consumers. Conagra relative an both benefit store to ideally experience and make value our Overall, is options with we national

a trends, shift settle take a start are starting at Slide and closer U.S. cohort. the the down, in Let’s population buy homes These consumers look demographic changes. Z underway consumers with highlights and starting are Millennial large XX Gen families. these the and growing to

remain increase enter the what people find the that phase, eat important and believe consumption increase predecessors. formation reaching more focused As And food their outsized they at-home past, they Z is millennial with of an the we value presented in amount will family frozen the we of particularly foods. we about when in Gen consumers than they

First, let’s about talk the near-term.

are of back, them. to have that data as sourced shows restaurant As natural. will the and decreased left, conscious term. in dollars they this a trends older expected less larger are of their Z suggests generations visits choices. likely it consumers a even to and service at-home. eating careers on will their earlier the consumers believe the consumers and people. earn This age. younger that whole, look stretch be The further as right as But more percentage than data more at-home food working Gen than bodes Fewer more even you consumers food to also means population is less millennials are success before millennials these food the their of bounces generations believe millennial achieve see food well in in to value meals are We age the shorter younger financial that Z The earning and for that consumers at-home. can their the the younger savvy We chart parents. the Gen already in their Compared on

that is replicating value, and As the many modern lot in brands this of We food the shows comfort believe paramount. the familiarity and of used particularly make that consumers short, trades makes a at-home relative are that’s this to finding versus consumers our eating, away-from-home are deliver in brands national provide sense. reliability because attributes national in-home they dining. flavors trust brands, made In those while shift away-from-home on-trend food consumers like offer that portfolio, options. When National provide. and experiencing eating brands, younger other superior like these imperative data have to modernized the they quality, on value trust in

XXXX consumers increased the rate prices at-home year in twice are broad the likely to their expensive become in increase face prices single more for levers away-from-home have sheets one on seek to nearly available expected inflation, the X.X than food more away-from-home, calendar prices to reduction already balance over calendar they of food than as spending is household This of in in important away-from-home at-home largest food XXXX. at-home faster trade As will are prices. the consumers even at typically times stretch food based as prices them as and

of shifts. strong in structural a to put several Our has capitalize position these Conagra portfolio years past the modernization the aggressive us over on

consumer now, more data support our are consumers to advantage, has share shifts slide Conagra more superior shows attracting of claim, you to excellent rates. competitive these to And shown meaningful believe for well-positioned value and Conagra younger Overall, is them our peers leverage to with value. performance. lifetime building trial, portfolio gain the Our we is repeat its repeat and consumers getting than to create shareholders. attractive we younger at XX appealing depth By

products Importantly, new across we our are We positioned portfolio. our believe brands. stickier win. Conagra data shows comes and us buyers has the to the made in this The that our continue have and to back to younger Way investments these make

adjusted of are discussed a reaffirming to with how year, the EPS expect approximately there. I we $X.XX on get updates full we few As guidance our earlier, for

guidance sales net plus We are approximately X%. our up increasing X%, organic approximately to be from

up adjusting slightly from guidance our XX%. our approximately approximately down are XX%, to XX% margin adjusted approximately operating We we and are from guidance about gross to XX.X%, inflation updating

the for more turn to performance financial I provide to detail and future, Now highlighted over our on have that will the quarter I strong our performance. positioning Dave for it

going highlights I from morning, on start Thank you, shown the over by Sean, good quarter XX. will everybody. and slide some

were that a of As this Sean there results factors number mentioned earlier, influenced quarter. our

encouraged First, consumer that demand for we strong; than our products and were anticipated. elasticities were second, see to remain better

see continued team these demand for to the to of the part pandemic key inputs our X.X% Overall, Way. sales the dynamic our created ongoing compared The topline we the impacted investments to to our dynamics, also the challenging including quarter, Conagra topline remained to rise inflation macro have An consumers. a However, our response ago during maximize in decision to favorably across the up of quarter net the meet food and environment we chain. commitment the actions with the is supply supply success during period. throughout the agile conditions year make important additional the to elevated realized and organic number

maintaining the focused remained brands on have We building strong and across portfolio.

decline breakdown efforts second our innovation these with show on a lapping the investments. primarily primarily continued X% slide in on XX. two-year continue an focusing in product the volume prior of a sales We net on approximately to volume of e-commerce during and the quarter promotion, due COVID-XX in further CAGR. demand advertising our year’s as surge The on We increased X.X% the spending and increasing by was earlier pandemic, in stage

we impact realized Beaters divestitures a the quarter an and and to business foreign and in butter of price quarter, these factors call, of On the increases all the than in first Anderson business the basis. a X.X% summary were that be the a to business, sales our decline contributed increase growth quarter’s P&L XX ago. mix. The driven driving this were last organic benefit. for and segment XX-basis-point at compared shows on XX-basis-point to pricing actions overall increase in retail shelves second decline Slide in year-over-year a the on H.K. both drove Egg by total our Conagra year net this a peanut very end Pan net compounded more sales net quarter inflation Peter driving volume pricing quarter. resulted X.X% offset sales we exchange a Together, two-year reflected actions domestic noted the The of on just quarter, starting X.X%. of mix our brand reflected Those was favorable the by

can segments, in growth you resulted continue of the to see, strong deliver As company. net net for organic two-year of compounded compounded we a which sales each growth our retail X.X% sales two-year three total in

for an to Foods see We more vendors a and products, takes on of around productivity a benefit to realize to operating program lower of as from price incurring associated utilize our current slide the This investments benefit frozen was expenses. patterns chain transportation overtime operations. than third-party align synergies order service to productivity, pandemic-related chain with support inventory offset of our it. improved within X.X% some mix, the cost to better Netted includes The cost by margin production. availability. The respond transitory can inflation costs, puts we to drove the plant delaying decisions customer more distribution also and and includes our with product and move incremental product the have consolidation reflect increased higher maximize XX-percentage-point. X.X-percentage-point network XX. are write-offs warehousing to X.X-percentage-point supply and taken such headwind maximize the Pinnacle environment acquisition investments These we X.X% You additional dynamic and actions made and to orders supply

approximately anticipated and chain rate expected, transportation, higher the The headwinds which are gross gross points declining margin hedge. margin favorable points. and XXX of adjusted both second inflation levers, difficult basis to by supply our combination than million $XX by proteins or goods driven higher in sold basis than was cost The for resulted increases inflation choice in investments of of XX.X% of quarter XXX

Our mentioned our impacted the investment due XX quarter to points earlier. I operating increased margin during A&P basis further was as by

segments XX. You of these slide costs how elevated reporting can each our on impacted see

was the consumers. down due adjusted to orders Refrigerated Frozen points, While segment most, XXX basis to and impacted materials our inflation each get investment incurred additional food primarily segment the with margin and service to operating was impacted, outsized & delivered

We second overall that margins are the confident half in rates. improve operating additional we we offset will the execute our as higher actions to inflation pricing

was across the input As pricing inflation an portfolio. early heavily through you the impacted cost first can of our see response, incremental created during $X.XX additional of we this EPS the XX, additional the pricing on second In customers QX inflation quarter quarter our though Even flowed headwind. our quarter the benefits incurred adjusted by second we in in December. quarter, P&L to slide announced

had P&L, Also, late we pricing lag expect the of benefits benefits these delivered interest the yet QX Mills lower in from Ardent to lower QX. our the benefit realize most diluted quarters. repurchases our pricing net to this a before expense We versus Although another due prior average realize year. have in good and EPS prior in count quarter venture joint another impact we and slightly actions share with share

how versus XX, to Turning adjusted EPS I landed our expectations. slide unpack to want QX

Our to due originally two had factors. second than came anticipated lower quarter main EPS in we adjusted

cost of inflation mentioned, EPS. by previously goods approximately approximately $X.XX XXX $X.XX points came as First, higher sold in basis of of to were

of for higher to we is the inflation, timing these the announced benefits incremental have behind half lagging offset additional While the actions inflation. second pricing naturally the

costs adjusted additional we supply to to coupled our elected the $X.XX $X.XX another chain impact described lead to orders, Second, the transitory earlier, cost service on EPS. with incur I to

second the as improve half to dynamics cost transitory and service progresses. these forecasting are We

of the expected is in second line with quarter net Looking we ended at increase the quarter. in debt-to-EBITDA the X.X slide for which seasonal leverage ratio a times, with XX,

X.X flow X.X of reviewing to maintaining today free EPS saying start credit grade remain our adjusted year expect a in an term investment to and on is guidance remain I we fiscal close year. We generate and cash leverage factors committed X.X with ratio I end which We of the morning, net achieve by net full to to the slide strong shown ability approximately times. here the expect second confident to this the in by target approximately in rating. to the to XX. $X.XX will leverage year want the driving times issued half updated for approximately of that we fiscal longer a times

As macro be very the that to our target continues the to achieve environment dynamic, for expectations have path shifted.

We are net performance our X% guidance incremental year-to-date, second to pricing as sales growth organic approximately our our to well stronger than increasing the as actions in reflect expected half.

lowering XX.X%. are operating to approximately our adjusted We margin guidance

We actions incremental of pricing net offset impact expect second the other dollar to inflation half sales and and chain incremental the the costs. supply the in

by have previous estimated expectations higher approximately We inflation estimate our XX%, versus gross increased transportation, for driven dairy and resin. costs largely proteins, to the

and We all margin input will continue respond available monitor to these will costs levers. using be we quick closely to

detailed, elasticity so our As to far. been price has favorable expectations Sean

benefits a results. actions, As to is in the expect operating inflation inflation quarter therefore quarter expect the we in flow inflation second the the the when pricing financial have experience lag in between take with third and increase those increases the half we the of line price up pricing realize the With these pricing dollar of QX, there see our roughly impact fiscal respect we third and and XXXX, we for the when as to our We lag margins in announced from a to additional explained impact to of in with timing second an through quarter we be with previously, catches have actions offset including actions reduced. fourth is the margins quarter. late margins, full small amount in

operate assumes to guidance supply that also the chain Our the effectively pandemic end-to-end as COVID-XX will to continue evolve. continues

relative quarter that to over reflected throughout I our results would superior consumers. have the Q&A, like the our value pandemic to turning Before and consistently this it operator for our ability deliver to to reiterate

and of That strength Our deliver based questions. it core reach the I Operator and to business concludes remarks on that my for hand the you goal ability listening. today. enjoy. prepared earnings at back is our people to our its confidence will for foods Thank to our now manufacture

ahead. Thank first Andrew you. comes [Operator Please from Instructions] with Barclays. go Lazar Today’s question

and everybody. morning New happy Good Year

Good morning.

Hi, Andrew.

if Hey. Two could. for I questions me,

elasticities government that. along a guidance are First, have have get as historically, elasticity, got sort you expectation fading remain several elasticity? again maybe dynamics about. how in Sean, play am given and of talked a of these back play to what set realize role I lines you to of And your than to into you terms And how have the maybe rolling what is trying of just some sort you of more for stimulus expectations there just think you into and building obviously then a below and are mentioned potential pricing that that account times a I just seen sense Dave. in does at lot half of that up that keep of lead I about taking some follow

Andrew. Sure, Right.

today a respect from items to I historically to standpoint national I continue, value And year-to-go assessing us hit marketplace Today, brands in we impact expect factored value the consumer’s stimulus. the choices. and having difference have will home to-date merchandising to into terms at-home past. with year-to-go positive we Let major you showing young as period. in well choices our but are say, working our a as of the year-to-go we was actions in prepared remarks, takes I demographic as like in that offering I and in elasticities inside pricing see seen how the tell comparison said between the our choices in I superior seen that are the actions. as comparison around value ours the elasticities versus talked Previously, marketplace my that’s I’d consumer me in everything outlook have on a to grocery planned close relative a is consumers what and biggest home, proximity the of modernized elasticities that consideration consumers between away-from-home and well have as that taking due nesting, store. from the huge move is about dynamics that place

were overall the of priced away-from-home reduce been terms that we reduction a able actually that because significantly end program to SNAP is benefits. the In same receiving SNAP, time, able some and food by pandemic, particularly from allotments consumers to shift payments emergency to driven at-home, the going don’t is at these for headwind of stimulus answer create material their to our was that to food the food the that food priced fronts, to to eventual spending mix business, reduced food believe and money including the short in and fundamentally higher it that But the at-home, hot on relative been comes payments unpack many portfolio also SNAP bit me because the know one let kind multiple alternatives. superior consumers versus I of been topic. back save start higher stimulus our to this it’s shift a have Since COVID-related a have on of value lower of

you Now that the sunset, few expect eating from as There talked the see brands emergency is seeing changes, to away to and are allotments a things of component the flow keep that here. in newly need this in cash we shift national mind created about at we I think behaviors meaningful home. around don’t are as consumer SNAP not a we one program

a dollars It’s not ecosystem happening back. the peeling total slow a reduction is in SNAP already cliff. the First, in as

and of event. been individual and point, the a not versus pandemic number one-time receiving their SNAP allotments already own waivers declining that has individuals to It’s benefits emergency schedules. ending any Now are states highs today on

SNAP program level the higher have benefits Second, I’d to raised permanent pre-pandemic. that is actually changes than a recent core say to continuing SNAP

So consumers. and finally, other than the maintains pre-pandemic. SNAP just going than say, changes early consumer that food away-from-home rise prices from did food USDA I’d they to the SNAP value perhaps, then, also as for not most third, at-home faster and food food to out data of have proposition pandemic at-home behavior that has the And benefited budget and the coming forecast that the does going who then, importantly, SNAP core relative at-home. to higher consumer of are And benefits stimulus show prices is

We ended our believe have And watching is, purchases of can superior are, working value versus in we emergency away-from-home because the are as brands significant offering we the not and change relative closely where brands, said, imagine, move store seen already packaged a foods. states yet from as huge alternatives especially given I you that both allotments to home. have consumers’ and

I in Thank the sort was expectations consensus timing And for on. incremental XQ lag one my you was about will a of a it’s for a of quick and where helpful of fade just more these and significantly costs looking year just goes get it some Dave. points, That But, is to these coming then around perspective. sort a below and for as for, a obviously, some points through Great. basis XXX and along XXX pricing sense you that. maybe impacting lines, questions basis starting then little very you your I talked of Dave, get terms lot that margins given XQ, think, there’s

is, it on and the XQ visibility this it seem XQ of pressure on it’s more what’s what flexibility are a kind stage in level does I level at that to So, I XQ, the given guess sense requires like that loaded. -- you question based it lot that to your to some your obviously more guess of it year. building be of puts would are I in deliver you guess

much. from. So, it’s a sort you but am question, Thanks broader I coming so of get where

it summarized And Yeah. Andrew. well, No. you

and of kind kind me it, to hit walk Let of the I try through so big takes. can the puts

we roughly So then operating as in remarks, to I expect QX up. QX margins QX line in with mentioned margins and margins my be

and from that total our of estimate XX.X%, that’s inflation so puts year If off XX% inflation to X.X%. to from the for look a QX takes expect approximate increased year second have we prior was and at XX%, you the inflation we QX, about half to now

costs additional will the we incurred continue of quarter challenges shipments given quarter into the support in third consumers and some to chain. that product second expect the also We to the continued supply getting in

March complexity in forecasting additional December this but and we are the announced from gradually QX QX pricing. will the small which impact We accepted we have bigger The much and are approach and impact timeframe. QX were that have improve on in they will given the we a timing, critical, as a pricing we actions,

forecasting So and visibility it’s announced, for good been accepted pricing very have the purposes. that been to has we

So QX will benefit meaningfully pricing from actions. these

quarter first catch we XX% price/mix that QX. impacted fourth lag up QX, the will as support the as will as half well transitory shipments and will in benefit as through inflation a in also expect incremental us to with to referenced, approximate and from some impact pricing start in the the as We that reduced costs well. of QX you that decline to I in just us hit the the mentioned, decline cost

we it’s meaningful So I improvement in that, to although are important expect we mentioned. forecasting note inflation, QX, higher as still

to of we expect by and our increase continue if pricing the HX and look that So unit at before to you offset volume, per being cost QX.

Yeah. Thanks so much.

from at comes ahead. today question JPMorgan. next Please Goldman our Ken go And

with to to margin clarify, line to as comment well? is wanted operating XQ’s expect apply margin the that just I solely be Dave, this much. when XQ’s in you should margin margin, so Thanks to about said gross Hi. roughly or the roughly

that’s the I on by the was but operating margin. gross driven commenting margin,

guess, examples inventory mentioned hear as the maybe wanted Thank I clarify, And and Okay. expenses write-offs, you one, if can I challenges. XQ’s you higher you. of some did elaborate non-recurring bit, I I couple the a think, I is write-offs of bit number heard overtime Perfect. and to that started about maybe over of a of people how can Omicron the into were. weeks, availability right, that on well? much your guidance labor as And you more also affect as talk has to last what then little baked risk

right, All it’s Ken, Sean.

all in a on of strained will to some be quarter. alongside And to XX% to things that Let QX. persevere normal absenteeism. word and number referenced of told faced operating I the also the year everything piece, is, is it’s But volume smaller a project not true. a I’d not I’d team because of efficiency back will in have with We that persevere, but team next our back we you clearly, acute you against persistently and it job is to could its what that perfect expected are about QX within so I’d chain topic similar particularly hands, mind, reasonable it, wrote QX, put in runs your yet, is think, that there we our saw certainly chain to factors year the QX why and pandemic consumer’s hot average. keep the the this possible of has I which through QX, perseverance keep largest in and that’s strained what to or you done day, volume at a us say for challenging food has a and to and less me the But other sustained is that things, QX because point, But it’s July, remain a and which supply as call volumetrically remarkable my know like in as be say demand persevering start quarter month X% margins backdrop, that to protracted say up proven the course. environment, as inflation. in to converged than factor I a entirely But our is doing supply which elevated Omicron a we too, create in

a have maximize have and we And don’t of saw diversified mega geographically efficiencies also big cetera. And We take like co-packers. plant. our up and COVID, those tightened et steps throughput, like in early I footprint as already there We are simplification, SKU plants we have earlier, across our mentioned our period. can line one to manufacturing in as things activity we merchandising year-to-go

challenge that be of So in reason should as note short ease lived. help good And things absenteeism. that, Tuesday, collectively, there’s will these to driven impact importantly, Omicron you believe your highlighted the from

into to is QX, I’d move So QX agile the and say and opportunity. beyond see team clearly as we sum staying up, we

to deliver most We of into positions go be of all the to meaningful wrap be as input metrics pricing recent in us that we and inflation, Omicron-driven absenteeism diminished, actions market begin rolling should into and quarter. onset final will improvement cost will multiple the our Dave?

Yeah.

of So your Ken. get question, let the first me part

costs supply across $X.XX impacted our in were So, operations, overtime $X.XX inventory from that given yeah, the quarter transitory chain higher to higher and of included we and incremental challenges all the labor write-offs.

Regarding has the no secret inventory, the end-to-end been in strained. this chain environment, it’s supply

suppliers. fast meet moving are are We as our to demand

company are priority and highest as use for and suppliers product food our that well. this quality safety include from So we the standards

that what we impact and processes are in thorough quarter. before that’s the ensuring write meet finished we nature this do off. and them materials into our in utilized, transitory is we for goods the move And third have they not, raw if as that QX, believe standards We happened

expected So have was level but this higher we always write-offs, some of for inventory reasons. than we those

a to driven And up write-off, it wrap issue? driven not a supply the messaging just it’s chain is demand

Yeah. Absolutely…

I that… for is mean, demand

Yeah.

You are correct.

Is that…

thing… Supply Yeah. chain complex a is

Yeah.

facets challenges, bit and a effect we compound during … friction of windows. of kind see of each those transitory you and kind tends into this to and multiple a it there are that have is run have the

so Very clear. Thanks much.

And our go Bryan BoA. comes ahead. at question Please next Spillane today from

Good Operator. Thanks, Hey. everyone. morning,

of guess, a ones Maybe two give can you there. around Ardent of operating tailwinds me. the I interest the balance with there’s I us bit full Equity expense some on year? items Just first, it’s profit income, little year the with for for some below help Dave, is some color the line -- for the think a of $X.XX. the quick or Mills, consensus

that maybe will up. be So

operating just for help tax little the kind of of be if how the Just rate, should about us in -- you below and a line terms year? full profit the bit the could thinking we also

Sure.

is that benefits. the I you and benefit on quarter, number continue expense, line, to think that the I think, had you $X.XX. expect we to which interest in number we Ardent, have saw in the the quoted

Ardent we So that call and to EPS, in $X.XX. contributes it, our upside see

the year-to-go. upside that in rate be we in Ardent tax have And should we So line guide with have. XX% the

little right this slightly, but We rate that’s use. are a favorable the to quarter

think, line, And for I are just I sales adjusting of this Okay. guess, especially was. then, incentive you to bang environment? an more sort because you questions, was Pre-COVID real of into of mentioned the to kind a above as that there Thanks we period, inflationary the an in the merchandising. ongoing be A&P if response just where that maybe of there’s more that are and And buck for going Sean, we here, that and not do to -- as are shifting one of are in kind you spend, as in inflationary now thing, it spend the emphasis is of that. to was seems like this

in the The on I building My one not that there’s not all normal them. think spent above typically it we aggressive comments brand merchandising that there. remarks investments would of as prepared in of kinds about Yeah. money Bryan. basically merchandising. way, of were is is as being in in-store line, today the Traditional would

make of when trouble it doesn’t And sense demand piece already on consistent the we start it, you having -- to got. since just pandemic, have you of so because excess very demand part stimulate are the servicing have been that the

things customers our getting getting our our that to for in that now kind terms we in product get and to have support we in-store we and the above to packaging sampling get some won’t of brand years investments all the investing new right physical with placement in on the because robust get ROI The line several into investing in innovation been store, from store, make everything change, theater. right It’s get for merchandise, in the of on investing building. and where the items of with to customers the do, that’s the innovation like shelf best we other COGS right

The and brand-building being have have was the A&P with in merchandising to agenda to investments are those that respect those is. before, I our quarter the And can the strong. above piece that given was as any piece. that innovation continued exclusively what line So investments, upon up said quarter, I depending of really then, the referring change

to will that we a the and right We continue want have that to item we spotlight put a we e-commerce, which in is the money new way marketplace hitting go, drive, in particularly A&P there.

but philosophical no in So changes will move we spend. that way around quarter-to-quarter, the

Thanks New Okay. Sean. guys. for that Year, Happy

Yeah.

you. Thank

next And ahead. today Please Palmer David ISI. from at our Evercore go comes question

Thanks. would to hedging just price, have Question on and into that that little benefit love XX, you a from dig bit. productivity, XXX-basis-point mix slide other. I

I have and of few might hedging and would benefits. have some you basis You productivity pricing imagine of basis hundred a points XXX points

Could that of So a some low, seen dig be that be productivity? of number but there. give pricing obviously, headwinds maybe headwinds benefits could and might into in the as there’s and you significant sense what offsetting

level Sure. let me a of kind you David, a bridge. give high

price/mix, So margin because quarter. we benefit We always was the a did right? is unfavorable of lower that’s our driver clearly had the segment. have XX% we segment and mix up of that So combine pricing. Primary in away-from-home

driver the brand the there. get embedded mix some is there big So there and segment but is away-from-home mix business, the in unfavorable unfavorable you

You those favorability numbers. went that because We improvement. volumes the of were had are costs plus But that chain points XXX supply We we that, there I in right, additional us we over that’s absorption have productivity through but forecasted or and sourcing incurred then basis combined. had down. hit

So that’s inflation, costs supply a show of additional outside separately. we the headwind chain for which

So basis that’s to XXX a high-level you points. bridge get to the

the those as margins? the you are you some gross cadence benefit, about, on how are about are are of I a of can thinking sense perhaps, you those items, And about looking directionally give directions even items year, sounds us how it the line and through mean, going get pricing to of then like the some rest you more we thinking

Yeah.

are So a for the price/mix estimating be year. perspective, approximately X% we from now price/mix will

be XX%. at line with So mentioned, in price/mix, QX we QX, expect about to and should be as I QX

there. benefit a there’s clearly, So,

it’s to productivity core both We continue expect productivity sourcing done as our to along click our and our benefit.

that and inflation laid looks that out the like. what continue We track. will kind to of So

to David, on the product QX really in So down expect and got expect getting the some into shelves, will as we then cost key decline transitory really I cost And of then, we to drivers continue they that that QX, incremental QX QX. and selling we and are and those the support to in go hit the costs, with QX. through in to mentioned, start then

of So kind that’s there. bridge a level high

weighing there’s chain, those really see would of you chain call you that think that costs, but that calling And costs, friction do much COVID era margins whether estimate are XX.X% overall? are is another, lot gross I will of in of XXXX supply anticipating you you fiscal are How here, How supply stop you costs. or margin? during but can a that transitory these on the the it, the you COVID them much friction overall

of back through to so let that there different that components want go it me you because I get on are that, to to cost. David, I many sure Yeah. make classify right.

Yeah.

and The can clearly, see Yeah. it. the we David, on things move are

comes things Some and then in. begun to had recently improve Omicron got you more

as on response. our So improve that’s move are helps best see of the material some things demand in of things a reminder pretty that’s company. The points from moving of in part multiple we that you -- and do and that to quickly acute margin implementation than this piece critically out brands, inflections pricing are and place have place, in response inflation benign going and of wrap available the dynamics and terms in fairly with navigating these both margin frankly, to it’s right they for recovery value our things of B, can the those things, an to more come pricing once place data QX. to demographic gross all consumer kind beyond And spot of are quarter, between QX that have brands terms that what by improving based being important fourth we pricing now perseverance. a different in key is cycles consumer into consumers, resonate and still But are directions. we friction our strong two away-from-home and QX is come ones and there’s the driven inflation important these that and pricing, And home. so working and in in things in latter the driven inflationary improvements, the I’d important to sweet enables former perseverance that’s which Because A, and seeing back benign it acute store and sharp of two as the picture, of we fourth these with when that huge quarter. younger common But gross move consumers big in information particularly products suggests is

get all we into kind challenging that period as of says, of So that’s are of to really coming setup QX other end this we the on side. kind of a and the good

Thank you.

Feeney question Edge. today at next Consumer Jonathan from comes Please ahead. our And go

at on as any mix what pricing weight realize Thanks things bridge Just very be, everything. months have to is an like, maybe you into, you if picture And between times is and know realized that. maybe lag? pricing much. particularly because Dave, on industry are you the whether detailed you environment? this looks margining scanner cover any it case you it’s A are look pricing, about you But I particularly was through, a while across related can’t appears question I I like or couple detail one, getting enough of X, things questions, up Utilization your concerned measured broadly, getting the big is Thanks. about comfortable been high, there. that first, what if am affect about make for preventing case. demand What the be, several comments ever clearly a on on from would even mentioned an -- -- Sean, consumer’s some what elasticities that’s maybe low, preventing is now? the is retailers you the could X big like things could it that a differently. price/ that the comment, buckets X, of are of But doesn’t

I would pricing is I getting Well, just through. think the say that

it consecutive this customers they We about we or are inflation experiencing different it There what market margin pass some to be I’d put and on is there they price true to But to may actions -- through they to we have action the customers them. take because been share. compress cost shelf. a to certainly take don’t our we pass want in way grab, gain what on actions price. equally that believe justified control may small say, with tend we with very close the -- And the the average, through that case, be pretty upfront do some

that the keep that to what because expected. awash pricing tends Jon, to I It’s come consistently pretty it following anticipate say the going we data. to up scanner with that pretty data, unfolded are it we take far, show what thus But would in actions scanner in tends and So much in lockstep. out we be is

point, say number. Jon, X, Yeah. impact X does to I would my previous just that mix

some mix we negative So had the in quarter.

you clear the Thank with stronger got scanner. pricing Thank you. I quarter exiting And you. yeah, are you. much that’s at Sean,

Thank you.

And Suisse. our with Robert Please go today Credit next question ahead. Moskow comes from

questions. Hi, there of guys. Happy New A couple Year.

all going know gets significant that’s guidance forecast your Are your your for expect an in and fiscal third think but are have the up have dissipate you you to I pricing my see fiscal your you a in model to dissipate but quarter, half elasticity second December and absenteeism experiencing for -- had in these are May Omicron in when the anyway, January like the year. quarter, says that, consumers volume experience year, them that I transitory at in wave you mean, because you the And to year. and your in and talked did costs to your raised is, I of what pricing But really I continued. question to is imagine you be I would change second in the the going then what’s changed would guidance fast I in quickly. XX% didn’t looks it the that’s these for your quarter? issues and look also And change it third you in through have confidence now going

have may think. relieved restaurant and consumers quick it than you to So you and back might that faster mild was go eating

price? in change the any for am So didn’t estimates year to correct I relation that volume you

first because mentioned of Dave don’t terms response we to expenses to And about the some we a little in of the ago, that QX, talked efficiency. in will in bit on the, comment Ken expect normal is me transitory as Let operated piece my what off, QX QX I of will that I call, and things boxes there some get in that’s are that variety determined And that incur, to inefficiency. consumers’ we persist -- product the as we created in so could were of a dynamic as willing many we QX. that hands of to were think an QX, in

be the might six weeks, Although, it it’s might we more less seven else it something look differently, where going of seen have absenteeism taking QX improvements already weeks Omicron-driven first, of place. and be for to whatever

say, create friction will put to like into -- at volumes even normally a that’s together I’d things comes bit all you on as then to I said other than when go still had we a referring we whack-a-mole efficiency we already focused start why you are if of some the and on exit what Omicron was So that’s volume diminish. expect that points are headwind persevere, of as But when I earlier we it, things some piece then as bit QX, in it QX improving, a those we it expect getting And less what we can much of will absenteeism. QX that expect. out of

pricing, them think to reasonable see margin expansion. it’s when diminish. you then the to that’s as meaningful expect to And we start I wrap

to $X.XX increased The up go $XX.XX. it might -- be selling meaningful sales, Rob. not how $X.XX been widget away-from-home or A to something that have it prices I and today like got of you alternative today. That’s value. product back shelf the a know translates that increase, to $X.XX Dave, consumer is versus one the if even for terms faster comments elasticity. In it’s to comparator coming comparator are see and thing go Historically, where versus the determines might on here the is, we a here is some Rob, have and the you keep I on B I might widget But side-by-side want it to calculus

a in not And home. is of clearly that that part home versus that are A at at that working consumers seeing. the now. They We working and being value office. aided consumer they is what superior are fact are is these of the working the are by lot proposition

we stuff structural play have see at more and that’s very we here elasticity. typically why you believe seen there’s would So than little

lower we to materially and seen a have historical but going on add much going lot some, change Dave, We than you that’s reasons want did to-date see whole that? to of don’t forward.

Yeah.

models volume category-by-category internal demand is has way science we go is inventory related, and our down. come Rob, determine forecast. Just declined declines the that’s a down. forecast, discussed will on the brand-by-brand, see do get quarter, Sean our transitory -- the this as so then said, that into we that bit It’s our we look And it significant, I we as we volume, costs, the the that at transitory And not volume little our earlier, and piece in internal do as our but elasticity. third

bit on to that’s the is little forecast based we on where we bottoms-up the brand in it a so category a it’s forecast. where was down But how volume it. got versus volume So impacts of pricing, and previous

Okay.

clarity. bit a right. you down. All little for that So Thank

our next comes Alexia Bernstein. from And go today Please with Howard question ahead.

everyone, Happy New the question. thank morning, for Year. you and Good

Happy New Year, Alexia.

on I slide the just just -- dig XX. e-commerce into want page So to

mean collect? years assume things at basically that two You and in XX% QX. the that over is click that year-on-year that are slowed does materially. XXXX, I from two mostly means said What have the moment, I is Is moment brick-and-mortar that fiscal channel have you different you and and over the XX% in e-commerce years at the you X.X% that of now are the that follow-up. taking? you approach e-commerce a at Thank regular making profitability that quick are investments that the are the

have our -- you we pot, that -- A&P look terms TV of years if are you spend seven of total changed before our less much made, even we investments like in-line you you dramatically last A&P about look we it’s things have in inefficient. the line, a Yeah. what if me heard in Alexia, lot that, that within talk -- if and it the the at on, that

also today importantly platforms, instead into those into social digital but put e-commerce. investments So we and

decision and we e-commerce a a are would said I we made back of to it. start-up as to say, bit years we going So a the business few invest treat in

e-commerce business. elastic. see e-trailers have So basket get them areas in and for very we once And into very Both good investment on started kind shopping the far more their invest ROI there would to consumers’ are part built that, getting we is and investing of it have high-growth e-commerce, for that algorithm a their We blood e-commerce into what a us areas and of of translates to the us. relative these in online We we areas it’s been, investments it’s the getting purchases consumer to purchase. been strong found is repertoire because both and platforms. other brick-and-mortar because retailers over say, out I in who pure have repeat

cycle back the come purchase product. So get is them they we when whatever for that

hard the of invest very is that’s there. happy key are the few why we e-commerce there marketing continue go returns to one our So we and that’s been with last shift years, to after and

around see and when move at year might any but growth. a dip, see in a base a will whatever quarter did of comps, period. a function -- you we We be quarter-to-quarter from wrapping also can you might We bit have when it’s base percent you large look be the the misleading, given it because we in absolute huge relative

one for for it as the are that e-commerce, is e-commerce. of us. that intuitively but may is profitable working being kinds in sales working are us. example, big be very you think Frozen, would at So, It’s and and of priority these not overall, it’s really amazed in successful you products a well well for

-- helpful. Very driver you the I increased percentage that is And remember the for moment. a you years, just quick innovation Pace meaningfully important innovation, an have of over at over the follow-up. you you last increases few -- where highlighted are you products. now at increases new time? are Are at are from at sales expecting or a what with level you are you further you level comfortable of and

about the this have and we from started, our we in comes like it’s And past rate, call we benefit areas percentage from We and it Yeah. level the year. innovation, stuff interested of that’s that single that three every of XX% day because have in I launched X%. were they years -- what because renewal that about back consumers the become and reflects in is we annual sales have the a new to amount gotten that persistent

trend, a which was it’s we on choice, went Power we been For with example, grain-free but last huge already us healthy success big year, big thing, are numbers for innovation-wise. the Bowls, and wrapping a

last terms ahead stuff. emerging we a our demand it’s try competition just of our because trend, competitors times our So bringing are team new using and be are we year’s when catching in interesting, science launching are of of many knockoff they out trends the to out and up

that so of to say, important would our repertoire. be part will innovation I continue these of front in keeping trends, an And out

will very Thank it I on. you much. Great. pass

concludes this to to like remarks. I’d conference Brian And Kearney our over session. ladies any turn for closing question-and-answer back and gentlemen, the

you. Great. Thank

archived been team has call and this is recorded may for press The any reminder, our web follow-up the anyone IR a will detailed in be available as as have. calls release. on that So,

reach interest to you free Thank in your Conagra feel for out. So Brands.

thank presentation. This attending sir. today’s We Thank today’s you, all for concludes you call. conference

have lines day. may a You now and disconnect wonderful your