November 24, 2015 07:15 AM Eastern Standard Time CAMDEN, N.J.--(BUSINESS WIRE)--Campbell Soup Company (NYSE:CPB) today reported its first-quarter results for fiscal 2016.
- Sales Decreased 2 Percent, Organic Sales Comparable to the Prior Year
- Adjusted EPS of $0.95 Increased 22 Percent
- Campbell Raises Outlook for Adjusted EBIT and EPS; Sales Guidance Lowered to Reflect Impact from Currency Translation
CEO Comments
Denise Morrison, Campbell’s President and Chief Executive Officer, said, “We’re encouraged by our first-quarter performance. While organic sales for the quarter were comparable to a solid prior year, we recognize that we have more work ahead to improve our growth trajectory. I am particularly pleased that we delivered a third consecutive quarter of adjusted gross margin expansion with improved execution in our supply chain. We drove strong adjusted EBIT and EPS performance across the company. Given an improved margin outlook for the year, we raised guidance for adjusted EBIT and EPS, while we lowered sales guidance to reflect increased currency headwinds.
“We began fiscal 2016 after successfully implementing a number of changes to align our enterprise structure with our strategy. Most significant among those changes were the formation of three new divisions with clear portfolio roles and the roll-out of a major cost savings initiative that included streamlining our organization, the launch of an Integrated Global Services organization and initiating zero-based budgeting. In addition, we have revised our reporting segments to reflect our new structure. We have made clear and meaningful progress and commence the new fiscal year better positioned to execute against our strategic imperatives.”
First-Quarter Results
Sales decreased 2 percent to $2.203 billion primarily due to the adverse impact of currency translation. Organic sales were comparable to the prior year as higher selling prices and a reduction in promotional spending were offset by volume declines.
Gross margin decreased from 35.3 percent to 34.3 percent. Excluding items impacting comparability in the current year, adjusted gross margin improved 2.6 percentage points. The increase in adjusted gross margin was driven by productivity improvements, higher selling prices, improved supply chain performance and lower promotional spending, partly offset by cost inflation.
Marketing and selling expenses decreased 7 percent to $226 million. Excluding items impacting comparability in the current year, adjusted marketing and selling expenses decreased 15 percent to $206 million primarily due to lower advertising, reflecting a shift in spending to later in the fiscal year, as well as benefits from cost savings initiatives and the impact of currency translation. Administrative expenses increased 19 percent to $156 million. Excluding items impacting comparability in the current year, adjusted administrative expenses decreased 8 percent to $120 million primarily due to benefits from cost savings initiatives and the impact of currency translation.
EBIT decreased 19 percent to $315 million. The first-quarter results were negatively impacted by the mark-to-market losses and charges incurred related to cost savings initiatives. Excluding items impacting comparability in the current year, adjusted EBIT increased 23 percent to $479 million reflecting a higher adjusted gross margin percentage, lower adjusted marketing and selling expenses and lower adjusted administrative expenses, partly offset by the adverse impact of currency translation.
Net interest expense increased $3 million to $28 million reflecting higher average interest rates on the debt portfolio. The tax rate increased 0.5 percentage points to 32.4 percent. Excluding items impacting comparability in the current year, the adjusted tax rate increased 2.2 percentage points to 34.1 percent primarily due to the geographic mix of earnings and higher U.S. state taxes in 2016.
Cash flow from operations was $218 million compared to $188 million a year ago, primarily due to higher cash earnings, partially offset by higher working capital requirements.
Revised Fiscal 2016 Guidance
Reflecting an improved outlook for margin performance and the increased negative impact of currency translation, Campbell has revised its fiscal 2016 guidance. This revised guidance is now based off recasted 2015 results for adjusted EBIT and adjusted EPS due to the previously discussed change in accounting for pension and postretirement benefits.
Sales are now expected to change by -1 to 0 percent (previously 0 to +1 percent), adjusted EBIT to grow by 4 to 7 percent (previously 3 to 5 percent) and adjusted EPS to grow by 4 to 7 percent (previously 3 to 5 percent), or $2.75 to $2.83 per share.
This guidance includes the impact of currency translation, which is now estimated to have a 3 percentage point negative impact (previously negative 2 percentage points), as well as the impact of the Garden Fresh Gourmet acquisition.
