Campbell Soup Co. Reports Decreased Sales And Earnings In First Quarter

Campbell Soup Co. reported its results for the first quarter of fiscal 2012.

Sales decreased 1 percent to $2.161 billion.

Solid earnings gains were made in U.S. Simple Meals, despite 3 percent sales decline.

Earnings declined in U.S. beverages and global baking and snacking.

Net earnings for the quarter ended Oct. 30, 2011, were $265 million, or $0.82 per share, compared with $279 million, or $0.82 per share, in the prior year.

Denise Morrison, Campbell’s president and CEO, said in a prepared statement, “As we’ve previously stated, fiscal 2012 will be a year of investment as we establish the foundation for the next era of profitable growth at Campbell.

"While it is early in this transition year, our efforts to stabilize U.S. Soup profitability are on track. As planned, we raised prices in response to inflation and reduced ineffective marketing spending, which led to improved profits despite anticipated volume declines. Specifically, we engaged in significantly less promotional spending. We also commenced our U.S. Soup advertising later in the quarter to coincide with the start of soup season. This is part of a planned, full-year timing shift of our media dollars into the soup season where they are most effective."

Morrison continued, “In U.S. Beverages, we faced increased inflation, a weaker category and intensified competition, with new entrants in both 100-percent vegetable juice and fruit and vegetable blends. We stepped up our advertising near the end of October, when our new ‘V8’campaign began airing. Although our consumption growth outpaced the category and our market share increased, this required significant investment to protect our business.

“We will increase investment in brand building and innovation programs this fiscal year. We’re encouraged by the speed to shelf of our new product innovations this quarter and our progress on the longer-term process of building a steady stream of consumer-driven innovation in our key businesses.”

Morrison concluded, “We’re making steady progress on implementing our new strategies. Our overall first-quarter performance was in line with our expectations, although the composition of our results was mixed. U.S. Simple Meals, Pepperidge Farm and North America foodservice met or exceeded expectations; U.S. Beverages and International did not. We have more hard work ahead, and we won’t rest until we change the growth trajectory of the company.”

As previously announced, fiscal 2012 will be a year of investment and transition for Campbell. The company confirmed its previous fiscal 2012 guidance. Campbell expects net sales growth to be between 0 and 2 percent, a decline in adjusted EBIT of between 9 and 7 percent and a decline in adjusted EPS of between 7 and 5 percent, or $2.35 to $2.42 per share, from the adjusted base of $2.54.

For the first quarter, sales decreased 1 percent to $2.161 billion. The change in sales for the quarter reflected the following factors:

• Volume and mix subtracted 5 percent;
• Price and sales allowances added 4 percent;
• Increased promotional spending subtracted 1 percent;
• Currency added 1 percent.

Gross margin was 39.5 percent, compared with 41.2 percent a year ago. The decrease in gross margin percentage was primarily due to cost inflation and negative mix, partly offset by higher selling prices and productivity improvements.

Marketing and selling expenses decreased 6 percent to $261 million compared with $277 million in the prior year, primarily due to lower advertising and consumer promotion expenses, principally in the U.S. Soup business, partly offset by the impact of currency. To increase its effectiveness, U.S. Soup advertising began later in the quarter to be more closely aligned with the start of the soup season.

Administrative expenses increased $5 million to $145 million, primarily due to higher incentive compensation and benefit costs, and the unfavorable impact of currency, partially offset by the benefit of cost savings from previously announced restructuring initiatives.