Conagra Brands (NYSE: CAG) reaffirmed its fiscal 2027 outlook after first-quarter adjusted earnings per share increased 5.1%, even as organic sales declined and margins narrowed. The packaged-food company said it is moving ahead with strategic pricing, higher brand investment, productivity initiatives and supply-chain optimization to support its full-year targets.

First-quarter organic net sales fell 1.1% from a year earlier to $2.59 billion. Reported net sales were $2.60 billion, down 1.4%, as a 2.1% volume decline more than offset a 1.0% benefit from price and mix. Foreign exchange added 0.2%, while mergers and acquisitions reduced sales by 0.5%.

Adjusted gross margin decreased 62 basis points to 23.8%, and adjusted operating margin fell 33 basis points to 11.5%. Adjusted operating profit declined 4.1% to $298 million. Cost-of-goods inflation, including the impact of tariffs, reduced operating margin, while price and mix and productivity provided partial offsets.

Adjusted EPS rose to $0.41 from $0.39. The company’s earnings bridge showed that higher equity earnings contributed $0.03 per share, while lower adjusted operating profit reduced EPS by $0.01. Other factors, including pension income, interest expense and adjusted tax expense, were flat in aggregate.

Segment performance

Grocery & Snacks organic sales fell 2.0% as a 5.4% decline in volume outweighed a 3.4% price-and-mix benefit. The segment generated $1.05 billion of reported sales. Adjusted operating profit decreased 7.2% to $205 million, while adjusted operating margin contracted 95 basis points to 19.5%.

Refrigerated & Frozen reported $1.05 billion in sales, with organic sales down 1.6%. Price and mix declined 1.5%, while volume was nearly unchanged, falling 0.1%. Adjusted operating profit dropped 13.0% to $100 million, and margin declined 118 basis points to 9.4%.

International organic sales increased 0.9%, supported by a 1.6% price-and-mix contribution that more than offset a 0.7% volume decline. Reported sales totaled $218 million. Adjusted operating profit fell 8.6% to $34 million, with margin down 196 basis points to 15.8%.

Foodservice delivered the strongest sales performance, with organic sales up 3.3% on 2.5% volume growth and a 0.8% price-and-mix gain. Reported sales were $273 million. Adjusted operating profit increased 11.4% to $31 million, and margin expanded 83 basis points to 11.3%.

Retail consumption remained broadly stable in dollar terms despite lower volumes. Total Conagra consumption declined 0.6% in dollars and 3.3% in volume during the 13 weeks ended Aug. 30, 2026. Frozen consumption was down 0.7% in dollars and 0.5% in volume, while snacks were approximately flat in dollars but down 3.9% in volume. Staples declined 1.1% in dollars and 5.5% in volume.

Investment, productivity and cash flow

Conagra increased advertising and promotion spending by 15% year over year in the quarter. A&P expense rose to $60.9 million from $52.9 million and represented 2.3% of net sales, compared with 2.0% a year earlier. The company said its focused spending increased media reach and engagement, with impressions reaching 2.2 billion compared with 520 million in the comparable fiscal 2025 quarter and media productivity improving 35% on a cost-per-impression basis.

Management said productivity remains on track to exceed 4% for the year. Conagra is also progressing with capital expenditure and network optimization projects, streamlining its leadership structure, reviewing its product assortment and evaluating strategic options for non-core businesses. Debt repayment remains a capital-allocation priority following a dividend reset in July.

Cash generation weakened in the quarter. Net cash used in operating activities was $4 million, compared with $121 million of operating cash flow a year earlier. Capital expenditures declined to $124 million from $147 million, but free cash flow was negative $128 million, versus negative $26 million in the prior-year period.

Conagra ended the quarter with $7.76 billion of debt and $372 million of cash. Net debt declined to $7.39 billion from $7.58 billion a year earlier, while the net leverage ratio increased to 3.99 times from 3.55 times. The company paid $168 million in dividends and repurchased $44 million of shares during the quarter.

Fiscal 2027 outlook

Conagra maintained its fiscal 2027 guidance for an organic sales decline of 1% to 3%, adjusted operating margin of 10.0% to 10.5%, and adjusted EPS of $1.40 to $1.50.

The outlook assumes inflation, including tariff effects, of approximately 5% to 6% and productivity above 4%. A&P investment is expected to increase to about 3% of sales, while adjusted selling, general and administrative expense excluding A&P is projected at approximately 10.5% of sales. The EPS forecast incorporates about $140 million of equity earnings, $25 million of pension income, $360 million of interest expense, an adjusted tax rate of roughly 24%, and an approximately $0.05 impact from the comparison with a 53-week fiscal year.

For the second quarter, management projects an organic sales decline of about 2%. Strategic pricing justified by inflation is scheduled to take effect in the middle of the quarter, with no change to the company’s assumed volume response. Adjusted operating margin is expected to be in the high-single-digit range, reflecting higher logistics and fuel costs, accelerated A&P spending and a shift in SG&A expenses from the first quarter.

The outlook remains subject to risks including inflation, tariffs, commodity and transportation costs, consumer spending pressure, supply-chain disruptions, pricing elasticity and Conagra’s ability to deliver planned productivity, cost savings and debt reduction.

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