Quick Overview

  • Chicago-based Conagra Brands expects high cost of goods sold (COGS) inflation in fiscal 2026, which begins May 26. According to the company's Thursday earnings report, core inflation is about 4%, with tariff impacts adding about 3%, bringing total COGS inflation to approximately 7%.
  • Although the company described the tariff situation as "fluid," its guidance assumes a 50% tariff rate on imported tinplate steel and aluminum, a 30% tariff on limited goods imported from China, and a 10% reciprocal tariff on imports from certain other unnamed countries. According to Thursday morning's conference call transcript, CEO Sean Connolly said tariffs are currently expected to add more than $200 million annually to COGS.
  • When asked about the drivers of core inflation, Conagra CFO Dave Marberger said animal proteins such as beef, chicken, pork, eggs, and turkey have the "largest impact," and based on current estimates, these costs are expected to "rise at a double-digit rate" in fiscal 2026.

In-Depth Analysis

The company issued this guidance as its fiscal 2025 fourth-quarter net sales (ended May 25) fell 4.3% year over year, and full-year net sales declined 3.6% year over year. Connolly said in the earnings release that the fiscal year environment was "more challenging than we anticipated," noting that higher-than-expected inflation in the second half, foreign exchange headwinds, and supply constraints impacted the company.

Last month, the CFO of the company, which makes Slim Jim snacks and Vlasic pickles, said at a Boston conference that the company was seeking to mitigate the impact of steel tariffs on the cans used to package many of its products, but declined to specify how.

During Thursday's call with analysts, Marberger noted that the company expects to partially offset tariff impacts by finding alternative supply sources, negotiating cost-sharing with suppliers, and exploring other ways to "reduce usage of tariffed goods."

When asked about declining sales, Connolly said the company is seeking to "restore volume health," maximize cash flow from its canned food business, and begin alleviating margin pressure through innovation. Looking ahead, Marberger also said the company is closely monitoring volume declines and is always looking to consolidate its network to reduce overhead costs. Meanwhile, executives said the company has been investing to enhance supply chain resilience.