UPDATE 3-Conagra misses estimates on weak sales, production hiccups; shares fall

Richa Naidu and Aishwarya Venugopal

fall@ (Adds CEO, analyst quotes, PIX available; updates shares)

June 27 (Reuters) - Conagra Brands Inc's on Thursday reported quarterly earnings and sales that fell short of analysts' estimates, citing weak demand for its Hunt's and Chef Boyardee brands and manufacturing challenges, and sending its shares down 8.9%.

The Chicago-based company, which has faced soaring commodities and freight costs for more than a year, also blamed the divestiture of its Wesson oil business and the impact of foreign exchange. Sales in the fourth quarter declined across Conagra's business units.

As higher input costs forced Conagra and other consumer goods makers to raise prices, the industry has also lost share to low-priced private label brands at Walmart, Kroger and Amazon.com.

"By the end of the quarter, price gaps were simply too wide for consumers to ignore and we lost volume," Conagra Chief Executive Sean Connolly said on a post-earnings call, noting that quarterly results were below expectations.

Conagra shares fell as much as 10%, the stock's worst day in six months.

Connolly said rivals also gained ground with aggressive promotions and that their lower prices ate into merchandising support it had expected for its Marie Callender's frozen meals.

Sales in Conagra's refrigerated and frozen business, previously a bright spot for the company, declined 0.6% to $687 million due in part to lower demand and a P.F. Chang's recall.

"Conagra's growth momentum in the frozen category appears to have started to taper off," Bernstein analyst Alexia Howard said. "This seems to have coincided with Kraft Heinz's heavy promotion in frozen products."

Conagra beefed up its portfolio of frozen food with its acquisition of Pinnacle Foods in 2018, adding healthy products from meat-alternative brand Gardein and Birds Eye.

"It might take longer than we thought for Conagra to normalize as management adjusts its business to the Pinnacle acquisition and fixes its shorter-term issues," Edward Jones analyst John Boylan said.

With the sale of its frozen Italian food brand Gelit, Conagra expects current-year adjusted profit of $2.08-$2.18 per share, largely below estimates of $2.16, according to IBES data from Refinitiv.

Net sales rose 32.9% to $2.61 billion, mostly because of the acquisition of Pinnacle Foods, but missed expectations of $2.66 billion. Excluding items, the company earned 36 cents per share, short of the average analyst estimate of 41 cents.

Net sales in the company's grocery and snacks business - its biggest after Pinnacle and home to brands such as Slim Jim and Peter Pan - fell 7.1%. P.F. Chang's, Dukes and Peter Pan were affected by production challenges during the quarter, the company said. Some of the manufacturing issues really hit towards the end of the quarter, Connolly said.

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(Reporting by Aishwarya Venugopal in Bengaluru and Richa Naidu in Chicago; Editing by Sriraj Kalluvila and Nick Zieminski)