Conagra Brands incurs impairment charge of nearly $1 billion

CHICAGO — Conagra Brands, Inc. incurred an impairment charge of $968 million during the second quarter of fiscal 2026, which the company said was a non-cash goodwill and brand charge primarily driven by a sustained decline in the company’s share price and market capitalization.  

For the past 12 months, the company’s share price has lost approximately 35% of its value and over the past 60 months it has lost approximately 52% of its value.

“We obviously have had a sustained decline in our stock price and market cap,” said David Marberger, chief financial officer, during a Dec. 19 conference call to discuss second-quarter results. “And, so, the way that you do impairment accounting, if there is a triggering event, and this would qualify for where your stock and market cap over an extended period of time is lower, you have to go back and do all the analysis you do for goodwill impairment and brand impairment.”

The impairment charge came at a time of high costs and weak consumer sentiment, which showed up in the company’s second-quarter results. For the quarter ended Nov. 23, the company recorded a loss of $664 million, much of it due to the impairment charge. During the same period of the previous year the company earned $285 million, equal to 60¢ per share.

Adjusted net income during the quarter, with the impairment charges stripped out, was $218 million, equal to 45¢ per share.

Quarterly sales fell 7% to $3 billion from $3.2 billion during the same period the year before.

The company attributed the sales decline to portfolio reshaping, weather in the United States and retailers not building inventories as much as expected ahead of the holidays.

“… We’ve had hurricanes for 10 years that hit continental US,” said Sean Connolly, president and chief executive officer. “And when we have hurricanes hit the continental US, we sell a lot of food in Florida, particularly canned food, also along the Gulf Coast, sometimes the East Coast. And, so, that’s kind of captured in our base.

“And last year, we had an unusually high hurricane quarter. We did not plan for that this year; we planned for a normal quarter. We didn’t get any hurricanes. So, that’s fortunate for the people along the coastline, but it was a little different than we planned. So that was a bit of a headwind.”

Connolly added that retailer inventory builds always come, but sometimes it’s in the second quarter and sometimes it’s in the third quarter.

Conagra’s business was impacted by an “atypically noisy” quarter that featured several headwinds.| Photo: ©JAMMER GENE – STOCK.ADOBE.COM

“ … Sometimes it’s linked to Thanksgiving timing and whether or not Thanksgiving is in Q2 or Q3,” he said. “Sometimes it’s linked more to the promotional calendar and is the promotional calendar queued up so that it’s earlier, like it was last year where we had our heavy promotions in frozen in Q2, those big promotions in frozen this year are disproportionately moved to Q3.”

The combined impact of the headwinds let Conagra Brands to see reduced volumes in all its business units, including Grocery & Snacks, Refrigerated & Frozen, International and Foodservice.

In Grocery & Snacks, sales fell 8.5% to $1.2 billion during the quarter. Seven percent of the decline came from portfolio divestments and the rest was organic sales, according to the company. Business unit volume fell 2.3% during the quarter. In Refrigerated & Frozen, sales fell 6.5% to $1.3 billion, with organic sales contributing 5.1% to the decline.

Connolly added that the consumer sentiment remained “fairly weak” during the second quarter.

“Household budgets continued to be strained, and value-seeking behavior persisted, with these pressures weighing most heavily on low and middle-income consumers,” he said. “We also saw some unanticipated dynamics this quarter, many of which we expect will be timing related. The government shutdown spanned about half the quarter along with the related pause in SNAP payments.”

After calling Conagra’s quarterly top line “atypically noisy” with underlying trends continuing to strengthen, Connolly reaffirmed the company’s outlook for the year of organic net sales in range of -1% to 1% compared to fiscal 2025 and adjusted EPS in a range of $1.70 to $1.85.

“For the second half, we expect to return to overall organic net sales growth driven by the wrap of our frozen supply constraints, our recent inflation-justified pricing actions, and the robust investment slate we have planned,” Marburger said.