Conagra Brands net sales fell 1.4% to $2.60B and operating margin dropped to 10.3%, but diluted EPS rose 5.9% to $0.36 on a normalized tax rate and higher Ardent Mills earnings; FY2027 guidance reaffirmed and the dividend was halved.
Revenue
$2.6B
-1.4% YoY
Net income
$174M
+6.0% YoY
Diluted EPS
$0.36
+5.9% YoY
Operating margin
10.3%
This period vs a year ago
Same period last year
This period
Revenue▼-1.4%
≈$2.6B
$2.6B
Net income▲+6.0%
≈$164M
$174M
Diluted EPS▲+5.9%
≈$0.34
$0.36
Year-ago figures (≈) are worked out from the growth rate the company reported. Each row has its own scale.
Conagra's first quarter: sales and operating profit fell, but EPS rose on lower tax and grain-milling earnings
Conagra Brands (owner of Birds Eye, Healthy Choice, Marie Callender's, Slim Jim and Reddi-wip) reported net sales of $2.60 billion for the quarter ended August 30, 2026, down 1.4% from a year earlier. Operating profit fell 22.7% to $268 million. Diluted earnings per share still rose 5.9% to $0.36. Most of that gap comes from two things outside the core food business: last year's tax bill was inflated by a business sale, and this year Ardent Mills, the flour-milling joint venture Conagra part-owns, had a very strong quarter.
About the period label: Conagra's fiscal year runs from June to May, so the company calls this the first quarter of fiscal 2027 (June 1 – August 30, 2026). This site files it as 2026 Q1, which is how we label other June–May companies such as General Mills. It is the quarter after the fiscal year that ended May 31, 2026.
At a glance
Organic net sales −1.1%. "Organic" strips out currency moves and businesses bought or sold. Volume (how much food was sold) fell 2.1%, and higher prices and a richer product mix added back only 1.0%.
Operating margin 10.3%, down from 13.2%. Operating margin is the share of sales left after paying for ingredients, factories and overheads, before interest and tax. Last year's figure included a $42.4 million gain on selling Chef Boyardee and the frozen-fish brands. On the company's adjusted basis, which removes that gain and other one-offs, the margin was 11.5%, down 0.33 points.
Operating cash flow −$4.2 million, against net income of $174 million. The business used cash this quarter. The main reasons were $44.3 million of settlement payments over Pam cooking spray, the seasonal build-up of inventory, and annual bonus payouts.
Metric
Q1 FY2027 (Jun–Aug 2026)
Q1 FY2026 (Jun–Aug 2025)
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YoY Change
Net sales
$2,595.9M
$2,632.6M
−1.4%
Organic net sales change
−1.1%
—
volume −2.1%, price/mix +1.0%
Gross margin
23.8%
24.3%
−0.5 pts
Operating profit
$268.4M
$347.4M
−22.7%
Operating margin
10.3%
13.2%
−2.9 pts
Adjusted operating margin (company measure)
11.5%
~11.8%
−0.33 pts
Equity method earnings (mainly Ardent Mills)
$50.4M
$29.4M
+71.8%
Net income
$174.3M
$164.5M
+6.0%
Diluted EPS
$0.36
$0.34
+5.9%
Adjusted EPS (company measure)
$0.41
$0.39
+5.1%
Operating cash flow
−$4.2M
$120.6M
n/m
Free cash flow (operating cash flow minus capex)
−$127.9M
−$26.2M
n/m
Takeaway: The food business itself got smaller and less profitable. Adjusted operating profit in Conagra's two big US retail segments, which make up about 81% of sales, fell 7% and 13%. The rise in EPS came from a normal tax rate replacing last year's divestiture-inflated one, plus a $21 million jump in Ardent Mills earnings. A grain-milling joint venture's good quarter is not something to count on repeating.
Segment performance
Segment
Net sales
YoY
Organic volume
Organic price/mix
Adj. operating profit
YoY
Grocery & Snacks
$1,051.1M
−2.6%
−5.4%
+3.4%
$204.9M
−7.2%
Refrigerated & Frozen
$1,053.8M
−2.1%
−0.1%
−1.5%
$99.6M
−13.0%
International
$218.1M
+2.7%
−0.7%
+1.6%
$34.4M
−8.6%
Foodservice
$272.9M
+3.2%
+2.5%
+0.8%
$30.9M
+11.4%
Grocery & Snacks (shelf-stable foods such as Slim Jim, Duncan Hines and BOOMCHICKAPOP) shows the clearest trade-off between price and volume in the filing. Conagra raised prices to cover rising costs, which lifted price/mix 3.4%. Shoppers responded by buying 5.4% less, a reaction the 10-Q calls "inflation-driven pricing and corresponding elasticity impacts" (elasticity is how much demand falls when price rises). Selling less while still running the same factories also spread fixed costs over fewer units, which the filing calls "unfavorable operating leverage". Gross profit fell $13.1 million, but adjusted operating margin held at a high 19.5%.
Refrigerated & Frozen (Birds Eye, Healthy Choice, Marie Callender's) had the steepest profit decline. Volume was almost flat at −0.1%. Price/mix fell 1.5%, which the filing attributes to "unfavorable product mix": shoppers chose cheaper items within the range. Gross profit fell $15.5 million, and the segment's adjusted margin was only 9.4%. This matters for the balance sheet too. The reporting unit's goodwill was written down to fair value at the end of fiscal 2026, so it has zero excess fair value. Goodwill is the premium paid in past acquisitions, carried as an asset. The 10-Q warns of "heightened risk of future impairments" if assumptions change, and a weak quarter like this one is exactly the sort of change it means.
International reported sales growth of 2.7%, but 2.4 points of that came from currency, mainly the dollar's movement against the Mexican peso. Organic growth was 0.9%. Input-cost inflation, unfavorable foreign exchange rates, and $1.6 million more in advertising pushed profit down 8.6%.
Foodservice (sales to restaurants and institutions) was the only segment where profit grew, up 11.4%. The press release says about 1.5 points of its 2.5% volume growth came from customer orders that fell in the third quarter last year. Without that timing effect, the segment grew roughly 1%.
What the headline numbers hide
Earnings rose, but pre-tax income fell. Income before tax fell 19.4% to $232.9 million. Excluding last year's $42.4 million divestiture gain, the decline is still about 5.6%. Net income rose because the tax rate fell from 43.1% to 25.2%. Last year, goodwill on the businesses sold could not be deducted for tax, so Conagra recorded $62.8 million of tax on a $42.4 million pre-tax gain. That made the sale an after-tax loss of $20.4 million. The adjusted tax rate barely moved (24.8% vs 25.0%), so taxes did not help the adjusted EPS increase from $0.39 to $0.41.
Most of the adjusted EPS increase came from Ardent Mills and lower bonus costs, not from selling food. Equity earnings rose $21.0 million, which management credits to "favorable market conditions" and how the venture handled volatile wheat markets. Adjusted SG&A (overheads) fell 3.7% to $321 million. That figure includes a $10 million benefit tied to fiscal 2026 incentive compensation, meaning last year's bonuses came in lower than had been booked, and share-based pay fell $7.3 million. Advertising rose 15.1% to $61 million. Adjusted gross profit fell 3.9%, so the core operations dragged on earnings.
Buybacks did not help EPS. Conagra bought back 2.7 million shares for $44.0 million, but diluted shares were 480.0 million against 479.6 million a year ago.
GAAP vs adjusted gap. GAAP EPS ($0.36) is $0.05 below adjusted ($0.41). The excluded items are restructuring ($9.7M pre-tax), net legacy legal charges ($8.1M), executive-transition costs ($3.5M), environmental matters ($3.0M) and hedging losses ($5.2M). Legal and restructuring charges show up in most quarters for Conagra, so treating them as one-offs flatters the adjusted figure somewhat.
Cash conversion was poor. Operating cash flow was −$4.2 million, compared with $174 million of net income. Inventories rose $248.6 million from the end of May to $2.15 billion, more than last year's $207.4 million seasonal build. Accrued payroll fell $102.9 million as bonuses were paid out. The company also paid another $44.3 million on cooking-spray lawsuits, after $141.1 million in fiscal 2026, and a $22.9 million diacetyl judgment is under appeal. After $123.7 million of capital spending, free cash flow was −$127.9 million.
The dividend has been halved. The quarterly dividend declared this quarter was $0.175 per share, against $0.35 in the same quarter last year. Cash paid out was still $167.5 million because the payment made in the quarter was the last one at the old rate. Management calls this "rebalancing capital allocation". It saves roughly $84 million a quarter, which is relevant with net debt at $7.39 billion, or 3.99× adjusted EBITDA (a measure of earnings before interest, tax, depreciation and amortization).
Outlook
Management reaffirmed its fiscal 2027 guidance, so it is unchanged from the prior guidance:
Organic net sales −3% to −1% (Q1: −1.1%, the top of the range)
Adjusted operating margin 10.0%–10.5% (Q1: 11.5%)
Adjusted EPS $1.40–$1.50 (Q1: $0.41)
Assumptions: about $140 million of equity earnings, $360 million of interest, a 24% adjusted tax rate, $550 million of capex, free-cash-flow conversion above 90%, and net leverage of about 4.0× at year end.
The 10-Q says more targeted price increases should be in place by the end of the first half, while warning that "consumer sensitivity to price increases may negatively impact our volumes." Higher oil, logistics and fuel costs were only partly offset by lower prices for some commodities, about $4 million of tariff refunds, and productivity savings.
Our read: Q1 makes the full-year targets look reachable, but it also shows the remaining three quarters have to be weaker. Q1 adjusted margin of 11.5% sits above the 10.0–10.5% guidance, which implies a margin below 10.5% for the rest of the year. Hitting the EPS range needs $0.99–$1.09 over three quarters, about $0.33–$0.36 a quarter, which is below Q1's $0.41. Q1 already had $50 million from Ardent Mills against a $140 million full-year assumption, plus a one-time bonus true-up. Grocery & Snacks lost 5.4% of volume on the price increases already in place, and more increases are coming, so volume is the line to watch. The cash target is the hardest. Conversion above 90% requires turning roughly $670–720 million of adjusted net income (implied by the EPS range) into free cash flow after starting the year $128 million negative. Next quarter, watch whether Grocery & Snacks volume declines ease, whether Refrigerated & Frozen mix stabilizes before goodwill gets retested, and whether inventory starts turning back into cash.
Source: Conagra Brands Form 10-Q for the quarter ended August 30, 2026, filed September 30, 2026. Adjusted (non-GAAP) figures, organic splits, and guidance are from the company's earnings release of the same date (Form 8-K, Exhibit 99.1).