Hurt by shrinking margins, ConAgra Foods (NYSE:CAG) revealed a 16% decline in fiscal second-quarter profits on Tuesday.
The Omaha-based maker of Chef Boyardee and Slim Jim said it earned $200.9 million, or 46 cents a share, in the quarter ended Nov. 28. A year earlier it earned $239.7 million, or 54 cents a share.
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Excluding one-time items, it earned 45 cents a share, meeting consensus calls from analysts.
Revenue increased 2% to $3.16 billion, narrowly exceeding the Street’s view of $3.14 billion. Consumer food sales inched up 1% to $2.1 billion, while commercial food sales rose 3% to $1.06 billion.
However, gross margins declined from 27.2% to 24%.
“Difficult market conditions, weaker-than-planned consumer response to promotions, and higher-than-planned inflation weighed on Consumer Foods’ profits despite progress in overall unit market shares and volume,” CEO Gary Rodkin said in a statement. “Profitability of our Commercial Foods segment was below expectations primarily due to selling and processing last year’s high-cost, unusually low-quality potato crop.”
Looking ahead, ConAgra projected non-GAAP EPS will rise in fiscal 2011 by low single digits.
ConAgra’s stock had little reaction to the news, falling 0.67% to $22.29 ahead of Tuesday’s open. The company’s shares were down nearly 3% on the year as of Monday’s close.