Conagra's Q1 FY26 Results: Divestitures and Tax Effects Mask Core Performance

Conagra Brands (CAG), the company behind household names like Duncan Hines, Slim Jim, and Birds Eye, recently released its financial results for the first quarter of its 2026 fiscal year. To understand the company's performance, let's dive into the details from its latest 10-Q filing with the SEC.

For the thirteen weeks ending August 24, 2025, Conagra reported total revenue of $2.63 billion, a decrease of 5.8% from the $2.79 billion reported in the same quarter last year. This dip in sales led to a net income of $164.5 million, or $0.34 per share. This is a sharp decline from the $466.8 million, or $0.97 per share, earned in the prior-year period.

While the drop in net income appears dramatic, a crucial piece of context lies in the company's tax line. Last year's first quarter included a significant one-time income tax benefit of $138.9 million. This year, the company faced a more typical income tax expense of $124.6 million, creating a substantial year-over-year swing that accounts for a large portion of the net income difference.

To visualize how Conagra's revenue translated into profit after all costs and expenses, the following flow diagram breaks down the key components of the income statement.

A Tale of Divestitures and Portfolio Reshaping

A major theme in this quarter's report is Conagra's strategic effort to reshape its portfolio of brands. The company recently completed the sale of its iconic Chef Boyardee business, along with its frozen fish brands, Van De Kamp’s and Mrs. Paul’s. These divestitures generated over $640 million in net proceeds and resulted in a pre-tax gain of $42.4 million. This gain is recorded as a reduction in operating expenses, slightly boosting operating profit. While these sales contributed to the decline in reported revenue, they represent a deliberate move to streamline operations and potentially focus on higher-growth areas.

Performance Across the Aisles

A closer look at Conagra's four business segments reveals a mixed performance, heavily influenced by the recent divestitures:

• Grocery & Snacks: This largest segment saw revenues fall 8.7% to $1.08 billion, largely due to the sale of Chef Boyardee.
• Refrigerated & Frozen: Sales were nearly flat, declining just 0.9% to $1.08 billion, also impacted by the sale of the frozen fish business.
• International: Revenue dropped 18.0% to $212.3 million, pressured by unfavorable foreign currency exchange rates and the divestiture of its stake in Agro Tech Foods Limited in the prior year.
• Foodservice: Sales to restaurants and other establishments were stable, dipping only 0.8% to $264.5 million, reflecting what the company describes as "soft yet stabilizing trends in commercial traffic."

Navigating Headwinds

Conagra is operating in a challenging environment. The company continues to face input cost inflation and shifting consumer behaviors amid macroeconomic uncertainty. In its filing, the company notes that a sustained decline in its stock price, coupled with these pressures, could potentially lead to impairment charges for its Refrigerated & Frozen and Foodservice reporting units in the future.

In conclusion, Conagra's first-quarter results reflect a company in transition. The headline numbers for revenue and net income are down, but this is largely a story of strategic divestitures and tax-related comparisons. The underlying challenge remains driving organic growth from its core brands in a tough market for consumer goods. Investors will be watching closely to see how the company reinvests the proceeds from its sales and whether its leaner portfolio can deliver stronger performance in the quarters ahead.