We're increasing our organic net sales guidance based on stronger-than-expected consumer demand and lower-than-anticipated elasticities.
Taken together, we continue to believe that elevated consumer demand, coupled with additional pricing and cost savings actions, will enable us to deliver adjusted diluted earnings per share of about $2.50.
On a two-year CAGR basis, organic net sales for the second quarter increased by more than 5% and adjusted earnings per share grew by nearly 1%.
Total Conagra retail sales were up 14.8% on a two-year basis in the quarter, with double-digit growth in each of our domestic retail domains frozen, snacks and staples.
Total Conagra household penetration was up 59 basis points on a two-year basis and our category share increased 41 basis points.
We again delivered strong quarterly growth in our $1 billion e-commerce business and e-commerce accounted for a larger percentage of our overall retail sales than our peers.
You can see on Slide 17 we currently expect gross inflation to be approximately 14% for fiscal 2022 compared to the approximately 11% we anticipated at the time of our first quarter call.
As I discussed earlier, we're reaffirming our adjusted earnings per share guidance of approximately $2.50 for the full year with a few updates on how we expect to get there.
We're increasing our organic net sales guidance to be approximately plus 3%, up from approximately 1%.
We're slightly adjusting our adjusted operating margin guidance to approximately 15 and a half percent, down from approximately 16%.
And we're updating our gross inflation guidance to about 14%, up from approximately 11%.
Overall, our actions favorably impacted our top line during the quarter with organic net sales up 2.6% compared to the year ago period.
The 4.2% decline in volume was primarily due to the lapping of the prior-year surge in demand during an earlier stage in the COVID-19 pandemic as volume increased approximately 1% on a two-year CAGR.
The second quarter volume decline was more than offset by the very favorable impact of brand mix and inflation-driven pricing actions we realized this quarter, driving an overall organic net sales growth of 2.6%.
Those increases were reflected in our P&L this quarter, driving the 6.8% increase in price mix.
Together, all these factors contributed to a 2.1% increase in total Conagra net sales for the quarter compared to a year ago.
As you can see, we continue to deliver strong two-year compounded net sales growth in each of our three retail segments, which resulted in a two-year compounded organic net sales growth of 5.3% for the total company.
We drove a 6.2 percentage point benefit from improved price mix, supply chain-realized productivity, cost synergies associated with the Pinnacle Foods acquisition and lower pandemic-related expenses.
Netted within the 6.2% are the additional investments we made to service orders and maximize product availability.
The 6.2% also includes transitory supply chain costs such as higher inventory write-offs and increased overtime to support operations.
The 6.2 percentage point benefit was more than offset by an inflation headwind of 11 percentage points.
The second quarter gross inflation rate of 16.4% of cost of goods sold was approximately 100 basis points or $20 million higher than expected, driven by higher-than-anticipated increases in proteins and transportation, which are both difficult to hedge.
The combination of the favorable margin levers, our choiceful supply chain investments and inflation headwinds resulted in adjusted gross margin declining by 483 basis points.
Our operating margin was further impacted by 20 basis points due to our increased A&P investment during the quarter, as I mentioned earlier.
While each segment was impacted, our Refrigerated & Frozen segment was impacted the most with adjusted operating margin down 707 basis points primarily due to outsized materials inflation and the additional investment incurred to service orders and get food delivered to consumers.
As you can see on Slide 33, our second quarter adjusted earnings per share of $0.64 was heavily impacted by the input cost inflation across our portfolio.
First, as previously mentioned, inflation came in higher by approximately 100 basis points of cost of goods sold or approximately $0.02 to $0.03 of EPS.
Second, the cost we elected to incur to service orders, coupled with the additional transitory supply chain costs I described earlier, led to another $0.02 to $0.03 impact on our adjusted EPS.
Looking at Slide 35, we ended the quarter with a net debt-to-EBITDA ratio of 4.3x, which is in line with the seasonal increase in leverage expected for the second quarter.
We expect to generate strong free cash flow in the second half of the fiscal year and expect to end the year with a net leverage ratio of approximately 3.7 to 3.8 times.
We remain committed to a longer-term net leverage target of approximately 3.5 times and to maintaining an investment-grade credit rating.
I'll start by saying that we remain confident in our ability to achieve approximately $2.50 in adjusted earnings per share for the full fiscal year.
We are increasing our organic net sales growth guidance to approximately 3% to reflect our stronger-than-expected performance year-to-date as well as our incremental pricing actions in the second half.
We are lowering our adjusted operating margin guidance to approximately 15 and a half percent.
We expect the incremental sales and pricing actions in the second half to offset the dollar impact of the incremental net inflation and other supply chain costs.
We have increased our gross inflation expectations to approximately 14%, largely driven by higher estimated costs versus the previous estimate for proteins, transportation, dairy and resin.

Summary:
We're increasing our organic net sales guidance based on stronger-than-expected consumer demand and lower-than-anticipated elasticities.
We're increasing our organic net sales guidance to be approximately plus 3%, up from approximately 1%.
As you can see on Slide 33, our second quarter adjusted earnings per share of $0.64 was heavily impacted by the input cost inflation across our portfolio.
We expect the incremental sales and pricing actions in the second half to offset the dollar impact of the incremental net inflation and other supply chain costs.