Campbell Soup Co. reported its results for the third quarter of fiscal 2012.
Net earnings for the quarter ended April 29, 2012, were $177 million, or $0.55 per share, compared with $187 million, or $0.57 per share, in the prior year. The current quarter's reported net earnings included charges associated with a restructuring program announced in June 2011.
Excluding items impacting comparability, adjusted net earnings decreased 4 percent to $180 million, and adjusted net earnings per share decreased 2 percent to $0.56 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, "We continued to advance our strategies to stabilize and then profitably grow North America soup and simple meals, expand our international presence and continue to drive growth in healthy beverages and baked snacks.
"Although overall sales trends are improving, we are not satisfied with our performance this quarter. As planned, we focused our marketing efforts on increasing advertising and consumer promotion. We executed well in some businesses, delivering solid sales growth in U.S. Beverages, Pepperidge Farm and Canada. We did not execute as well in others."
Morrison concluded, "We remain committed to our three growth strategies. At Campbell, we are building a business for the long term through innovation, brand building and expansion into higher growth segments that connect with today's consumers. We have made solid progress reinvigorating our innovation pipeline, and customers have responded favorably to the new products we have planned for next year. With continued focus on our strategies, we plan to deliver sustainable profitable net sales growth that will create value for shareholders."
As previously announced, Campbell expects net sales growth to be between 0 and 2 percent, a decline in adjusted EBIT of between 9 percent and 7 percent and a decline in adjusted EPS of between 7 percent and 5 percent, putting adjusted EPS in the range of $2.35 to $2.42, from the 2011 adjusted base of $2.54. Management expects to achieve this guidance range, with sales and adjusted EBIT near the lower end of the range and adjusted EPS, benefiting from a favorable tax rate, near the upper end of the range.
For the third quarter, sales were $1.821 billion, comparable to a year ago. The sales were impacted by the following factors:
Volume and mix subtracted 1 percent;
Price and sales allowances added 3 percent;
Increased promotional spending subtracted 2 percent.
Third-quarter financial details include:
Gross margin was 38.8 percent compared with 40.4 percent a year ago. The decrease in gross margin percentage was primarily due to cost inflation, increased promotional spending and unfavorable mix, partly offset by higher selling prices and productivity improvements.
Marketing and selling expenses increased 5 percent to $256 million compared with $243 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 13 percent, reflecting brand-building investments across most businesses.
Administrative expenses decreased $4 million to $144 million, primarily due to the benefit of cost savings from restructuring initiatives.
Earnings before interest and taxes (EBIT) were $264 million compared with $307 million in the prior-year quarter. Excluding items impacting comparability, adjusted EBIT in the current quarter was $268 million. Adjusted EBIT decreased 13 percent primarily due to the decline in gross margin percentage and higher advertising and consumer promotion expenses.
The tax rate in the quarter was 26.2 percent compared with 34.3 percent in the prior year due to lower taxes on foreign earnings in the current year.