Campbell Soup Co. reported its results for the second quarter of fiscal 2012.
Net earnings for the quarter ended Jan. 29, 2012, were $205 million, or $0.64 per share, compared with $239 million, or $0.71 per share, in the prior year. The current quarter’s reported net earnings included charges associated with the previously announced June 2011 restructuring program. Excluding items impacting comparability in the current year, adjusted net earnings decreased 13 percent to $207 million, and adjusted net earnings per share decreased 10 percent to $0.64 in the current quarter. A detailed reconciliation of adjusted financial information to the reported information is included at the end of this news release.
Denise Morrison, Campbell’s president and chief executive officer, said in a prepared statement, “At the midpoint of our fiscal year, we are focused outward on consumers and on executing against our three strategies to return Campbell to sustainable, profitable net sales growth. As we said last July, implementing our new strategic direction will require substantial investment to fund brand-building efforts and a step change in innovation, particularly in U.S. Simple Meals. We are confident that these changes will position Campbell for future success.
“Six months into our transition, we continue to make progress in stabilizing overall U.S. Soup profits, achieving the fourth consecutive quarter of profit growth for this business. We expect improved sales in the second half, as we continue to shift our emphasis to brand building efforts that will drive consumer usage.”
Morrison continued, “Sales gains in our U.S. beverages business, where we have a solid ongoing innovation program, outpaced category growth. Trends in this business improved since the launch of our new advertising campaign in October. Significant cost inflation and marketing investments negatively impacted profitability in both the quarter and the half.
“Across our portfolio, we increased marketing spending this quarter, consistent with our plan to shift our emphasis to longer-term brand-building activities. Advertising and consumer promotion expense rose 6 percent as we invested in key brands.”
Morrison concluded, “We are executing a strategic turnaround in an environment of weak volume and high inflation across the food industry. Our first half has been impacted by headwinds in our beverages and Australian businesses, but we continue to make progress against our key growth strategies. In the second half, we expect improved trends in our beverages and Australian businesses, and in U.S. Soup, we will begin to cycle our change in discounting, providing an opportunity for better sales performance. We will continue to invest in brand building and innovation, and we are on track to achieve our full-year guidance.”
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, putting adjusted EPS in the range of $2.35 to $2.42, from the 2011 adjusted base of $2.54.
For the second quarter, sales decreased 1 percent to $2.112 billion. The change in sales for the quarter reflected the following factors:
- Volume and mix subtracted 3 percent;
- Price and sales allowances added 3 percent;
- Increased promotional spending subtracted 1 percent.
Gross margin was 38.4 percent compared with 39.4 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 increased 2 percent to $297 million compared with $291 million in the prior year, primarily due to higher advertising and consumer promotion expenses, partly offset by lower selling expenses. Advertising and consumer promotion expenses increased 6 percent, reflecting brand-building investments across several businesses.