Financial Data and Key Metrics Changes - The company reported a cumulative increase of over $2 billion in total delivered costs due to sustained inflation over six consecutive years, starting from the second half of fiscal 2021 [8][10] - Fiscal 2026 is expected to see an additional 11% cost increase due to inflation, leading to temporary margin compression [10][11] - The company anticipates a return to margin expansion in the future, particularly in the frozen segment, driven by productivity improvements and pricing actions [11][12] Business Line Data and Key Metrics Changes - The company has prioritized investments in volume growth for frozen and snacks, which have shown a strong consumer response [7][10] - The canned food business is expected to remain stable, focusing on cash generation rather than volume growth [45] Market Data and Key Metrics Changes - The company is experiencing double-digit inflation in animal protein costs, which significantly impacts overall inflation rates [18][19] - The company expects core inflation of 4% for fiscal 2026, with additional tariff-related costs contributing to overall inflation [19][20] Company Strategy and Development Direction - The company is committed to investing in brand building and volume growth despite current inflationary pressures, viewing healthy volumes as essential for long-term value creation [11][12] - A strategic focus on modernizing brands and leveraging technology, including AI, is part of the company's plan to drive growth and lower costs [13][33] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the ongoing inflationary environment and its impact on margins but remains optimistic about future margin recovery through productivity and pricing strategies [10][55] - The company is focused on overcoming supply chain challenges and is optimistic about returning to positive volume growth in key categories [36][55] Other Important Information - The company plans to maintain its dividend while also investing in infrastructure and paying down debt, forecasting a cash flow conversion rate of 90% [24][25] - The company has undergone significant portfolio reshaping, divesting non-strategic businesses to focus on growth areas in frozen and snacks [70][71] Q&A Session Summary Question: Current challenges in the industry - Management indicated that the current challenges are not structural but rather temporary, with expectations for margin expansion in the future [11][12] Question: Core inflation breakdown - The CFO provided details on the 4% core inflation, highlighting that 60% of costs are material, with significant inflation in animal proteins [17][19] Question: Dividend strategy amidst high leverage - Management reiterated their commitment to maintaining the dividend while also focusing on debt reduction and investment in the business [24][25] Question: Pricing strategy in competitive categories - Management discussed their tailored pricing approach, emphasizing the importance of maintaining brand equity and consumer connection [45][66] Question: Innovation impact on pricing - Management highlighted successful innovations, such as the Banquet Mega Chicken Filets, which have allowed for premium pricing despite market challenges [95][98]

Financial Data and Key Metrics Changes - The company is experiencing a cumulative increase of over $2 billion in total delivered costs due to sustained inflation over six consecutive years, starting from the second half of fiscal 2021 [10][11]. - Fiscal 2026 is projected to have a core inflation rate of 4%, with an additional 3% attributed to tariffs, leading to a total inflation impact on costs [21][82]. Business Line Data and Key Metrics Changes - The company is prioritizing investments in volume growth, particularly in frozen and snacks, despite ongoing inflationary pressures, indicating a strategic shift towards maintaining brand health and consumer engagement [12][36]. - The frozen snacks segment has shown a strong consumer response to investments made in the first half of fiscal 2025, leading to a return to absolute volume growth [9][10]. Market Data and Key Metrics Changes - The company is facing significant inflation in material costs, particularly in animal proteins, which are inflating at double-digit rates, impacting overall cost structures [19][20]. - The company has noted a slight decline in total volumes, with scanner data indicating a decrease of about 1%, but anticipates a recovery as supply chain issues are resolved [34][36]. Company Strategy and Development Direction - The company is focused on building brands and driving volume growth, viewing healthy volumes as essential for long-term value creation, despite temporary margin compression due to inflation and increased investments [12][36]. - There is an ongoing initiative to reengineer core work processes using technology, including AI, to enhance growth and reduce costs [14][36]. Management's Comments on Operating Environment and Future Outlook - Management acknowledges the current inflationary environment is not transitory and expects continued inflationary pressures, but remains optimistic about margin expansion in the future [11][12]. - The company is committed to maintaining its dividend while also investing in infrastructure and paying down debt, indicating a balanced approach to financial management [25][26]. Other Important Information - The company is actively reshaping its portfolio to focus more on growth areas like frozen and snacks, while considering divestitures of non-strategic grocery businesses [68][70]. - The company has seen success with innovative products, such as the Banquet Mega Chicken Filets, which have exceeded sales expectations and contributed to premiumization efforts [95][99]. Q&A Session Summary Question: Should the aggressive investment approach suggest that current industry challenges are more structural? - Management believes the current challenges are not structural but rather a result of sustained inflation and supply chain issues, and they expect margin expansion in the future [12][36]. Question: Can you unpack the 4% core inflation number for fiscal 2026? - The CFO explained that 60% of total costs are material costs, with significant inflation in animal proteins being a major driver of the 4% inflation estimate [21][22]. Question: Why maintain the dividend despite high leverage and capital spending needs? - The CFO reiterated the commitment to an attractive dividend while also focusing on debt reduction and maintaining an investment-grade credit rating, forecasting a cash flow conversion of 90% [25][26]. Question: How does the company view price and promotion in major categories? - Management stated they are not searching for answers to drive volume growth, as they have successfully achieved it in the past and are focused on modernizing brands and investing in high-quality displays [32][33]. Question: What is the outlook for productivity and its impact on gross margins? - Management expressed confidence in achieving strong productivity levels, with expectations of over 5% productivity in fiscal 2026, which will help mitigate inflation impacts [78][80]. Question: How does the company plan to address competition from private label products? - Management noted that while they are below average in private label development, they will monitor competitive pricing closely, particularly in categories like canned foods [85][86].

Financial Data and Key Metrics Changes - For fiscal year 2024, organic net sales were $12 billion, down 2.1% due to a prolonged volume recovery in the domestic retail business [21] - Adjusted gross margin expanded by 58 basis points, and adjusted operating margin expanded by 34 basis points year-over-year [8] - Adjusted EPS for the fiscal year was $2.67, with a net leverage ratio of 3.37 times, improved from over 5.5 times [10][22] Business Line Data and Key Metrics Changes - In Q4, organic net sales declined 2.4%, driven by a volume decline of 1.8% and a 0.6% price mix reduction [23] - The Snacks business saw positive consumption trends, helping to gain market share, while Grocery and Foodservice segments experienced volume declines [24] - Refrigerated and Frozen segments showed volume increases, with Frozen single-serve meals returning to growth [12][24] Market Data and Key Metrics Changes - Approximately 65% of the portfolio held or gained volume share in Q4, marking the fourth consecutive quarter of share gains [11] - In the Snacks domain, 80% of brands held or gained volume share, indicating strong competitive performance [12] - The international business delivered strong sales growth, driven by results from Mexico and global exports [24] Company Strategy and Development Direction - The company is focused on maximizing consumer engagement through strategic investments, aiming for gradual volume improvements [18] - Continued brand building investments are planned for fiscal 2025, with expectations of stable adjusted gross margins despite ongoing inflation [19] - The company aims to achieve $1 billion in cost savings by the end of fiscal 2025, targeting a net leverage ratio of approximately 3.2 times [17][32] Management's Comments on Operating Environment and Future Outlook - The management anticipates a challenging consumer environment in fiscal 2025 but expects a transition towards a normalized operating environment [18] - The company is encouraged by steady volume improvement and market share gains from investments made during fiscal 2024 [31] - Fiscal 2025 guidance includes organic net sales growth projected to be flat to down 1.5%, with adjusted EPS expected between $2.60 and $2.65 [20][32] Other Important Information - The company repaid a $1 billion senior note in Q4 and improved free cash flow by approximately $1 billion over fiscal 2023 [30] - Capital expenditures increased by 7% to $388 million, with dividends paid amounting to $659 million in fiscal 2024 [30] - The company plans to resume minimal share repurchases in fiscal 2025 to offset dilution from equity incentive plans [32] Q&A Session Summary Question: What are the expectations for organic net sales growth in fiscal 2025? - The company expects organic net sales growth to be flat to down 1.5% compared to fiscal 2024 [32] Question: How is the company addressing inflation and cost pressures? - The company plans to achieve approximately 4% cost savings as a percentage of cost of goods sold to offset projected inflation [18][32] Question: What is the outlook for the Snacks and Frozen segments? - The Snacks segment is expected to continue its positive momentum, while Frozen is anticipated to maintain steady growth [12][24]