ConAgra Foods Inc. (CAG:US), the packaged-food company that owns Chef Boyardee and Healthy Choice, is seeking a new chief executive officer after current leader Gary Rodkin announced plans to step down next May.
The board has established a search committee led by Richard Lenny, a ConAgra director who used to be chairman and CEO of Hershey Co., according to a statement today. Rodkin has run the Omaha, Nebraska-based company since 2005.
ConAgra has been struggling to digest last year’s acquisition of Ralcorp Holdings Inc., which created a hybrid company with both brand-name foods and private-label products. Sluggish sales and ineffective promotions led its last quarterly earnings to miss projections in June. The company may be looking to a new leader to improve its financial performance, said Craig Sterling, an analyst at EVA Dimensions in New York.
“The company has been a big disappointment,” he said.
ConAgra shares have tumbled 14 percent in the past year, compared with a 15 percent gain for the Standard & Poor’s 500 Index. The stock rose 1.5 percent to $31.43 today in New York.
Rodkin said today that the company is improving its operations and has the right product portfolio to appeal to budget-minded consumers.
“We are beginning my last fiscal year at ConAgra Foods by making good progress, and I have deep conviction that we are on the right path to deliver sustainable, profitable growth,” he said in the statement.
The fact that Rodkin will be at the helm for almost 10 more months suggests he’s not getting pushed out, said Erin Lash, an analyst at Morningstar Inc. in Chicago. Rodkin, who previously worked at PepsiCo Inc. (PEP:US) and General Mills Inc. (GIS:US), will be 63 when he retires next year.
Still, the new CEO faces the challenge of selling ConAgra’s existing brands alongside Ralcorp’s private-label foods -- something the company hasn’t proved it can do smoothly. ConAgra has a stable of well-known products, including Reddi-wip, Slim Jim and Hunt’s. Ralcorp, meanwhile, sells food that retailers package under their own names.
Timothy Chen, an analyst at Rhino Trading Partners in New York, said in June that investors may push for a ConAgra breakup if the company can’t demonstrate that it can better integrate Ralcorp with its existing brands.
ConAgra’s fourth-quarter results missed its forecast, hurt by slow sales of consumer foods and shrinking profit at the private-label business. Its profit in the period amounted to 55 cents a share, excluding some items, short of the 60 cents that ConAgra had predicted. The results, which also prompted a fourth-quarter writedown of $681 million, sent the shares on their biggest one-day decline in almost six years.
The company is contending with pricing pressure in supermarket brands -- an industry that’s been growing but offers slim margins. Quarterly operating profit for that unit fell about $60 million in the fourth quarter from a year earlier.
The CEO transition may create another headache for a company trying to transform its operations, Chen said today.
“It’s an unnecessary distraction at a very critical time of the company,” he said. “If you’re having heart replacement surgery, the surgeon is not going to walk out right before the heart is supposed to come out.”
It also could be difficult for the board to find another CEO, since ConAgra hasn’t yet justified that the $5 billion Ralcorp acquisition was the right move, Chen said.
“It’s a half-finished product,” he said. “It’s not a clean company.”
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