Campbell Soup Co. Reports Decline In Fourth Quarter Earnings, Gain In Sales For Fiscal 2011

Campbell Soup Co. reported results for the fourth quarter and fiscal year 2011.

In the fourth quarter, sales increased 6 percent to $1.607 billion; excluding currency, organic sales increased 1 percent.

Net earnings for the quarter ended July 31, 2011, were $100 million, or $0.31 per share, compared with $113 million, or $0.33 per share, in the prior year. The current quarter’s reported net earnings included charges associated with previously announced restructuring initiatives. Excluding these charges, adjusted net earnings increased 25 percent to $141 million, and adjusted net earnings per share increased 30 percent to $0.43 in the current quarter.

Denise Morrison, Campbell’s president and CEO, said in a prepared statement, “Our fourth-quarter results were slightly better than expected. Our global baking and snacking segment delivered strong performance with double-digit top- and bottom-line growth in the quarter. We also continued to make progress on our efforts to stabilize U.S. Simple Meals. But we have more work to do. As expected, lower promotional spending contributed to improved soup profits despite anticipated volume declines. We’re confident that rebalancing our marketing investments toward consumer-focused brand building activities and developing a more robust innovation pipeline is the right approach to restore profitable growth over time. Sales of U.S. beverages declined slightly in the quarter, compared to 12-percent growth a year ago. Significant cost inflation and increased promotional spending depressed beverage profits in the quarter.”

Morrison concluded, “We’re pleased to be finishing a very difficult fiscal year with some positive momentum and a new strategic direction. Fiscal 2012 will be a year of transition, as we build the foundation for a new Campbell with a renewed focus on meeting consumers’ needs. Implementing our new strategic framework will require substantial investment as we extend brand and product platforms through more consistent innovation in Simple Meals, baked snacks and healthy beverages, reinvigorate consumer marketing activities and drive international expansion in priority markets. Our team is beginning to implement these strategies, and the company is energized by this change in direction.” For the fourth quarter, sales increased 6 percent to $1.607 billion. The increase in sales for the quarter reflected the following factors:

• Volume and mix subtracted 2 percent.
• Price and sales allowances added 2 percent.
• Decreased promotional spending added 1 percent.
• Currency added 5 percent.

In the fourth quarter:

• Gross margin was 39.8 percent compared with 40.4 percent a year ago. The decline in gross margin percentage was primarily due to cost inflation and unfavorable mix, partly offset by productivity improvements, higher selling prices and reduced promotional spending.
• Marketing and selling expenses decreased 11 percent to $196 million compared with $221 million in the prior year, primarily due to lower advertising expenditures.
• Administrative expenses increased $3 million to $170 million, primarily due to the impact of currency.
• Earnings before interest and taxes (EBIT) were $169 million compared with $187 million in the prior-year quarter. Excluding items impacting comparability, adjusted EBIT in the current quarter was $232 million. Adjusted EBIT increased 24 percent primarily due to earnings gains in international simple meals and beverages, North America foodservice and global baking and snacking, and the favorable impact of currency.
• Adjusted net earnings per share were $0.43 in the current quarter compared with net earnings per share of $0.33 in the prior-year quarter, an increase of 30 percent. Earnings per share also benefited from fewer outstanding shares reflecting the impact of the company’s share repurchase programs.

For the full year, sales increased 1 percent to $7.719 billion, global baking and snacking sales increased 9 percent, and U.S. Simple Meals sales decreased 6 percent.