Conagra Brands expects to raise prices on more of its food products over the coming months even while acknowledging that those hikes are starting to hurt demand.

The maker of Slim Jim jerky and Hunts tomato sauce said Thursday that additional price increases will take effect over the next two quarters to help offset higher costs.

Inflation-driven price hikes boosted the Chicago-based company’s sales in the three months ended May 29 but led to a 6.4% drop in volume.

Consumer companies must strike a delicate balance as they try to preserve margins in the face of the highest U.S. inflation in four decades.

Conagra’s hikes have so far trailed the pace of rapidly rising costs and it anticipates further price hikes to have more of an effect on shopper demand in the coming year.

The company’s shares fell 7.8% at 9:40 a.m. in New York, their biggest drop in almost two months.

The stock had risen 4.7% this year through Wednesday’s close, outperforming both consumer-staples peers and the broader S&P 500 Index.

Sales for the fiscal fourth quarter rose 6.2% to $2.93 billion, in line with estimates.

Adjusted earnings of 65 cents a share beat the 63-cent average estimate of analysts.

Conagra expects earnings per share, excluding some items, to rise 1% to 5% this fiscal year compared with a year ago.

Analysts were looking for 8% growth, according to the average estimate compiled by Bloomberg.

“We’d expect investors to ask the question whether this guidance is prudently conservative or if the company is less well able than a number of its peers to handle the current challenging industry dynamics,” Barclays analyst Andrew Lazar said in a note to clients.

Conagra said in April that price hikes taking place this quarter would be highly targeted toward frozen food and protein snacks.


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