Conagra Cuts Dividend in Half as New CEO Resets Guidance Lower
Conagra Brands posted a $2.0 billion goodwill impairment and slashed its dividend to $0.70 a share annualized as incoming CEO John Brase issued fiscal 2027 guidance below current-year results.
Conagra Brands (CAG) reported fourth-quarter results on July 15 that closed out a fiscal year marked by stalled sales, compressed margins and a leadership change, and opened fiscal 2027 with a guidance range set below what the company delivered in fiscal 2026. The maker of Birds Eye, Slim Jim and Marie Callender's brands cut its quarterly dividend to an annualized rate of $0.70 a share from $1.40, the first reduction disclosed in this quarter set, alongside the completion of a CEO transition from Sean Connolly to John Brase, the former Smucker president and chief operating officer who took over June 1.
The quarter itself showed a trajectory that had been improving through fiscal 2026 losing momentum. Organic net sales were roughly flat in the fourth quarter, as a 0.5% price/mix gain was offset by a 1.6% volume decline, a sharp deceleration from the 2.4% organic growth Conagra posted in the third quarter and a reversal of the recovery narrative built over the prior two quarters. For the full year, organic net sales fell 0.4%, landing below the midpoint of the (1)%-to-1% range the company had reaffirmed as recently as its CAGNY update, while reported net sales for the year declined 2.9% to $11.3 billion.
Reported revenue for the quarter rose 3.6% year over year to $2.9 billion, but that headline figure diverged from the underlying organic trend and largely reflected timing and portfolio effects rather than demand strength. Margins told a more consistent story: adjusted gross margin fell 130 basis points in the quarter to 24.5%, extending a streak of compression that has now persisted for three consecutive quarters, and brought the full-year adjusted gross margin down 175 basis points to 24.0%. Reported operating margin swung to negative 57.5% in the quarter because of a $2.0 billion non-cash goodwill and brand impairment charge, the third large impairment in four quarters and one that pushed full-year impairments to $2.93 billion, versus just $72 million to $150 million a year earlier.
Segment results were mixed but leaned negative. Grocery & Snacks adjusted operating profit fell 4.1% in the quarter to $216 million, a smaller decline than the 10.6% drop in the third quarter and the 21.8% drop in the second, suggesting the segment's profit erosion is decelerating even as it remains negative. Refrigerated & Frozen moved the other direction: adjusted operating profit there fell 18.5% to $139 million, as the volume recovery that had produced 3.9% volume growth and 3.6% organic sales growth in the third quarter gave way to a 0.5% organic sales decline in the fourth, with volume up only 0.3% and price/mix down 0.8%. Adjusted SG&A rose 11.0% to $369 million on restructuring charges and incentive compensation, reversing the year-over-year declines Conagra had reported in the two prior quarters, and the anchor release carried a new line item for CEO separation costs.
Free cash flow for the year fell to $979 million from $1.3 billion, a roughly 25% decline that reversed the over-delivery commentary management had offered around mid-year, when free cash flow conversion guidance had been raised to about 105%. Net debt fell 11.9% to $7.1 billion at fiscal year-end, continuing a deleveraging trend that had held net leverage at 3.83 times for three straight quarters, though the company's new guidance points to leverage rising to roughly 4.0 times in fiscal 2027. Equity earnings from the Ardent Mills joint venture fell 25.8% in the quarter to $43 million and 22.8% for the full year to $141 million, extending declines of 22.9% and 33.5% in the two prior quarters on weaker commodity trading revenue; fiscal 2027 guidance calls for roughly $140 million from the venture, well below the roughly $200 million originally estimated for fiscal 2026.
For fiscal 2027, Conagra guided to organic net sales change of negative 3% to negative 1%, adjusted operating margin of 10.0% to 10.5%, and adjusted earnings per share of $1.40 to $1.50. Each figure represents a step down from fiscal 2026's results, which included roughly flat organic sales, an 11.3% adjusted operating margin and $1.72 in adjusted earnings per share.
The dividend cut, delivered alongside the leadership change, marks the clearest signal yet that Brase is resetting expectations rather than defending the payout levels set under his predecessor, with the annualized rate falling to $0.70 a share from $1.40 paid in each of the prior three quarters.