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ConAgra Getting Out Of Private Brands Biz

ConAgra Foods

In releasing its 2015 fourth quarter results ended May 21, ConAgra Foods said Tuesday that it plans to “exit the private brands operations.”

Sales for the company’s private brands segment were $1 billion, down slightly, in the fourth quarter. The company estimates that the extra week favorably impacted sales and volume by approximately 7 percent.

ConAgra says the segment posted an operating loss of $25 million due to impairment and restructuring charges. After adjusting for $56 million of net expense from items impacting comparability in the current quarter, and $618 million of expense from items impacting comparability in year-ago period amounts (mostly impairment charges), comparable operating profit declined 30 percent, which includes the benefit of the extra week.

Higher commodity costs negatively impacted profits, as did lower volumes, according to ConAgra. Ongoing margin management initiatives are expected to improve profitability. The company says it has implemented a reorganization and is highly focused on improving execution; this should strengthen customer relationships and volume performance gradually over time.

“With fiscal year 2015 now behind us, we are now pursuing a different plan to maximize value for our shareholders,” said ConAgra Foods CEO Sean Connolly.”Our new plan will center on a more aggressive approach to driving margin improvement through SG&A reductions, supply chain efficiencies and other projects. It also sharpens our focus on growing our consumer foods and commercial foods segments. We expect to continually refine our portfolio with prudent divestitures and acquisitions, and there will be a strong emphasis on deploying capital in ways that benefit shareholders.

“As I have intensely studied the situation in our private brands operations over the last few months, it has become clear that the time and energy the company is devoting to the private brands turnaround represent a suboptimal use of our resources. To prevent further distraction, we are pursuing the divestiture of our private brands operations. Because the outcome of our strategic review for the private brands operations will influence our long-term financial outlook, we will wait until this process is complete before sharing long-term financial commitments. We expect to offer operating details of our plans as well as long-term financial expectations at an investor event later this year.

“The underlying objective of the new strategic direction we are sharing today is long-term shareholder value creation. While we have a high degree of conviction in our plans, we also acknowledge that markets and opportunities change over time. For this reason, our management team and our board of directors approach long-term plans in a practical and flexible manner. If we are convinced that some other set of opportunities, or some other course of action, improves our outlook or will better reward shareholders, we will adapt our plans accordingly.”

Go here to view ConAgra’s latest financial results.

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