Conagra Brands, Inc. — Form 10-Q summary
Reporting period: First quarter of fiscal 2027, the 13 weeks ended August 30, 2026; comparisons are with the 13 weeks ended August 24, 2025. Amounts are in U.S. dollars. Financial statements are unaudited.
Key financial results
| Metric | Q1 FY2027 | Q1 FY2026 | Change |
|---|---|---|---|
| Net sales | $2,595.9 million | $2,632.6 million | Down 1.4% |
| Gross profit | $618.7 million | $640.6 million | Down 3.4% |
| Gross margin | 23.8% | 24.3% | Down 0.5 percentage points |
| Operating profit | $268.4 million | $347.4 million | Down 22.7% |
| Net income | $174.3 million | $164.5 million | Up 6.0% |
| Diluted EPS | $0.36 | $0.34 | Up $0.02 |
| Operating cash flow | $(4.2) million | $120.6 million | Down $124.8 million |
| Capital expenditures | $123.7 million | $146.8 million | Down $23.1 million |
Gross margin was calculated as gross profit divided by net sales. Net income increased despite lower operating profit, with lower income tax expense and higher equity-method investment earnings contributing to the comparison. The prior-year quarter included a $42.4 million divestiture gain; the current quarter did not.
Segments and material changes
- Grocery & Snacks: Sales fell 2.6% to $1,051.1 million; segment operating profit fell 7.2% to $204.9 million. Organic volume declined 5.4%, partly offset by 3.4% higher price/mix.
- Refrigerated & Frozen: Sales fell 2.1% to $1,053.8 million; segment operating profit fell 13.0% to $99.6 million. Price/mix declined 1.5% and organic volume declined 0.1%.
- International: Sales rose 2.7% to $218.1 million, including favorable foreign exchange; segment operating profit fell 8.6% to $34.4 million.
- Foodservice: Sales rose 3.2% to $272.9 million; segment operating profit rose 11.4% to $30.9 million. Management attributed volume growth partly to customer-order timing.
Management cited lower sales, input-cost inflation, and unfavorable operating leverage as pressures on gross profit, partly offset by productivity. The prior-year period included sales from the Chef Boyardee and frozen fish businesses, both sold in fiscal 2026, affecting comparability.
Cash, debt, and liquidity
- Cash and cash equivalents were $371.6 million at August 30, 2026, up from $218.0 million at May 31, 2026. Cash flow from operations was negative, primarily reflecting litigation payments and lower operating profit; inventory absorbed $248.6 million of cash during the quarter.
- Current assets were $3,359.8 million and current liabilities were $3,065.4 million, giving working capital of $294.4 million. Long-term debt, including current installments, totaled $7,727.6 million; notes payable were $32.5 million.
- The company issued $500 million of 5.40% senior unsecured notes due August 2031. It expects to repay $762.5 million of notes maturing in October 2026 using commercial paper and cash on hand. The reported weighted-average coupon on long-term debt was approximately 5.0%.
- No borrowings were outstanding under the $2.0 billion revolving credit facility or commercial paper program at quarter-end. The company reported compliance with its debt covenants and stated that available liquidity should cover obligations, planned capital spending, and dividends for at least the next 12 months.
- Cash dividends paid were $167.5 million; the quarterly dividend was $0.175 per share. The company repurchased 2.7 million shares for $44.0 million and had $793.6 million remaining under its share-repurchase authorization.
Outlook, risks, and unusual items
- No full-year sales or earnings guidance is stated in the provided filing text. Fiscal 2027 capital expenditures are estimated at approximately $550 million.
- Management expects additional targeted price increases to be implemented by the end of the first half of fiscal 2027 to help offset input-cost inflation. It warned that consumer sensitivity to price increases could pressure volumes. It cited weak consumer sentiment, inflation, commodity-cost fluctuations, supply-chain pressures, and trade and regulatory uncertainty.
- Management reported higher oil, logistics, and fuel costs, partly offset by certain lower commodity costs, tariff refunds, productivity initiatives, and pricing actions. Advertising and promotion spending increased by $8.0 million year over year.
- New Project Catalyst aims to simplify and modernize operations through process redesign, technology, and organizational changes. The company recorded $2.3 million of related cash charges in the quarter but said it cannot yet estimate the initiative’s total charges or timing. A separate frozen-fried-chicken supply-chain initiative is expected to result in approximately $85 million of restructuring charges, including about $21 million cash, with completion expected by the end of fiscal 2028.
- Q1 items affecting comparability included restructuring charges of $9.7 million, legacy legal net charges of $8.1 million, executive-transition charges of $3.5 million, environmental charges of $3.0 million, and $5.2 million of derivative losses in general corporate expense. These items should be considered when interpreting reported trends.
- The company paid an additional $44.3 million in Q1 related to cooking-spray litigation. A $22.9 million final judgment in one Pam cooking-spray case is under appeal; the company is pursuing insurance coverage. Litigation accruals were $20.0 million at quarter-end. Beatrice-related environmental accruals were $41.7 million. Management said it does not expect the disclosed matters to have a material adverse effect, but noted estimates could change and future effects could be material.
- The Refrigerated & Frozen reporting unit and certain indefinite-lived intangible assets had no excess fair value over carrying value following fiscal 2026 write-downs, creating heightened future impairment risk if assumptions or market conditions change.
Important facts for investors to verify
- Whether pricing actions offset inflation without causing further volume declines, particularly in Grocery & Snacks.
- Whether operating cash flow recovers as inventory investment and litigation payments change, and how the company funds the October 2026 debt maturities.
- Progress and eventual costs of Project Catalyst and the frozen-fried-chicken restructuring initiative.
- Developments in cooking-spray litigation, the appeal of the $22.9 million judgment, insurance recoveries, and environmental liabilities.
- Assumptions underlying the outlook for $550 million of fiscal 2027 capital expenditures and the company’s stated liquidity and deleveraging plans.