* Q1 net sales and profit miss estimates Expects to spend more on advertising in Q2 Q1 food service sales fall 6.9 pct (Adds details from conference call, CEO quote; Updates share price)
By Uday Sampath Kumar
Sept 27 (Reuters) - Sales at Conagra Brands Inc fell short of Wall Street estimates on Thursday as the packaged food company sold fewer products at full-price to restaurants and caterers, weakening profit and sending the company’s shares lower.
The company also said its second-quarter advertising and promotion costs would be higher than the first quarter.
The sales miss and cost warning pushed the company’s shares down as much as 7 percent and weighed on the stocks of rivals such as Kellogg and J.M. Smucker.
Conagra has been investing on marketing its products in the face of intense competition among packaged food makers and the shifting taste of the health-conscious consumer.
“We need to be in-store and online ... and this takes investment,” Chief Executive Officer Sean Connolly said.
“It’s about getting noticed.”
The company’s net sales in the first quarter rose 1.7 percent to $1.83 billion, but were below the average analysts’ estimate of $1.85 billion, according to Thomson Reuters I/B/E/S.
Sales at the food service business that delivers products such as sauces and beef cuts to caterers and restaurant chains fell 6.9 percent to $234 million in the quarter, compared to estimates of $246 million.
However, its larger refrigerated foods business continued to be the bright spot with sale rising 3.2 percent.
The company has been looking to bulk up in the fast-growing frozen meal business and recently announced the acquisition of Pinnacle Foods Inc for $8.1 billion.
That deal would catapult it much closer in size to rival Nestle and give it much needed scale and negotiating power to deal with stiff competition.
Overall, net income attributable to the company rose 17 percent to $178.2 million in the first quarter ended Aug. 26.
Excluding items, the company earned 47 cents per share, missing estimates of 49 cents per share.
The company’s shares fell 6 percent to $33.76 in afternoon trading. (Reporting by Uday Sampath in Bengaluru; Editing by Sweta Singh and Shounak Dasgupta)