ConAgra shares off; private brands unit struggles

ConAgra shares dropped more than 1.6% in early morning trading Thursday, as the company said it has taken a $1.3 billion charge on its struggling private brands segment.

The maker of such familiar brands as Chef Boyardee, Hunt's and Hebrew National took a $247 million write-down on the store-brand unit in the previous quarter.

CEO Gary Rodkin, who will retire in about a month, acknowledged problems in the private brands segment, which he called "significantly below expectations."

Sales for the private brands segment were $1 billion in the quarter, down 5% from year-ago period, reflecting 7% lower volume. Overall volume declines for most major product lines — pasta, cereal, snacks, condiments and in-store bakery — more than offset some growth in nutrition bars, the company said in a statement. The segment posted an operating loss of $1.3 billion.

Rodkin said ConAgra was undertaking initiatives to improve the division's performance.

Investors seemed to mostly ignore the company's better-than-expected results and improving outlook. For the year ending in May, the company raised its per-share earnings outlook to a range of $2.15 a share to $2.19 a share. Last month, ConAgra cut its earnings target to $2.13 from $2.18 a share.

All eyes are on the major food companies like ConAgra this week since Wednesday's shocking $36 billion merger announcement by H.J. Heinz and Kraft Foods Group to form the world's fifth largest food and beverage company.

At the same time, change is afoot at ConAgra. The former CEO of Hillshire Brands, Sean M. Connolly, is scheduled to take over as CEO of ConAgra in about a month.

Outgoing CEO Rodkin said, in a statement, that the company had "significantly transformed" over the past nine years. "Our team made significant strides culturally, organizationally, operationally, and in the marketplace, generating consistently strong cash flow and putting us in a good position to capitalize on the next set of opportunities," he said.

For the period ended Feb. 22, sales in ConAgra's consumer foods division fell 1.9% to $1.84 billion, as volume remained flat.

The Omaha-based company posted a loss of $954.1 million, or $2.23 a share, compared with a profit of $234.3 million, or 56 cents a share, a year earlier.