ConAgra Foods, Inc. (NYSE:CAG) Q4 2018 Earnings Conference Call Transcript

Jun 27, 2018 • 09:30 am ET


ConAgra Foods, Inc. (NYSE:CAG) Q4 2018 Earnings Conference Call Transcript


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Sean Connolly

into more detail about why we're so excited about this acquisition, I do want to take a step back for a moment and talk about where we are in terms of executing our plan and how we've positioned Conagra to make this transaction a success.

3 years ago this month, I hosted my first call as CEO of Conagra. And during that call, I outlined my view that there was tremendous opportunity at the company, but that in order to unlock it, we needed to move quickly and take bold actions on a number of fronts. And we did just that.

We exited private brands as well as noncore businesses like Spicetec and JM Swank, and we successfully executed the Lamb Weston spin. With these changes and many others, we transformed Conagra into a new pure-play branded food company.

At our inaugural Investor Day in 2016, we described the cadence of our work for our new company in a five-year plan. Initially, our focus was to reset the top line by breaking Conagra of its volume at any cost approach and to focus on our cost structure.

Recognizing that cost cutting wasn't enough, we outlined a plan to bend the top line trend by building an innovation pipeline supported by new marketing programs and adding on-trend brands through modernizing acquisitions like Blake's, Frontera, Thanasi Foods, Angie's BOOMCHICKAPOP and Sandwich Bros. with a focus on driving profitable growth.

Looking ahead to fiscal '19 and '20, we are focused on accelerating our growth and maintaining the strong momentum that has continued to build over the last three years. Meanwhile, margin expansion has become and will remain a way of life at Conagra over the long term.

As we close fiscal 2018, we are delivering on the commitments we outlined at our Investor Day in 2016. We've made significant progress toward our goals of increasing margins, improving our top line and building a winning company.

Now moving to Slide 9. You can see that by aggressively attacking costs to rightsize our SG&A and driving realized productivity, we've been able to achieve strong margin improvement. Adjusted gross margin increased by 380 basis points since fiscal 2015 and adjusted operating margin increased by 460 basis points over the same three-year period.

But we knew we had to grow, so we strengthened our foundation by pruning low-value SKUs, updating our innovation capabilities to modernize our iconic brands and investing behind on-trend brands consumers are demanding. We are also keenly focused on our differentiated capabilities in our value-over-volume strategy.

Collectively, these efforts have enabled us to successfully bend the trend on the top line, and we continue to gain traction. This was our primary focus during fiscal 2018, and we're pleased with our momentum as underlying sales trends continue to strengthen. And the quality of our revenue base continues to improve as reflected in increasing and higher quality total points of distribution.

Base velocities also remain strong and base dollar sales continue to grow. It's been hard