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June 3, 2020

Campbell Soup Co. makes significant upgrade to outlook as sales surge on Covid-19

Campbell Soup Co. has made a significant upgrade to its financial guidance due to "unprecedented" demand.

By Dean Best

Campbell Soup Co. has made a significant upgrade to its financial guidance across key metrics after the US food group experienced “unprecedented broad-based demand” in the third quarter due to coronavirus-linked shopping behaviour. 

Sales in the three months to 26 April rose 15% to US$2.2bn, increasing 17% on an organic basis. Over the first nine months of the year, Campbell booked sales of $6.5bn, a rise of 4%, and 5% in organic terms.

Consequently, the company now expects annual sales to climb 5.5% to 6.5%, compared to a previous range of minus 1% to plus 1%. Adjusted EBIT is seen increasing 12-14%, from a prior estimate of 2-4%.

And for adjusted earnings per share, the outlook has been set at growth of 25-27%, from 11-13% previously. Campbell expects an end EPS figure of $2.87 to $2.92, versus $2.55 to $2.60.

President and chief executive Mark Clouse said Campbell’s household penetration rose six percentage points during the quarter from a year earlier as it attracted new customers.

“In the quarter, we experienced unprecedented broad-based demand across our brands as consumers sought food that delivered comfort, quality and value. This demand resulted in double-digit increases in organic sales, adjusted EBIT and adjusted EPS,” Clouse said.

“Since the onset of the Covid-19 pandemic, we have simplified our mission to keep our people safe, while meeting the urgent need for food and supporting the communities in which we operate.”

Campbell’s third-quarter EBIT rose 11% to $273m on a GAPP basis, and was up 31% at $386m in adjusted terms. EPS increased 34% to 55 cents (GAPP) and was 57% higher at 83 cents adjusted.

Sales during the quarter were driven by volumes in meals, snacks and beverages, Campbell said, “reflecting increased demand for at-home food consumption with the stay-at-home mandate”. 

Campbell said of of the new guidance: “Although the effect of the Covid-19 pandemic on our sales, adjusted EBIT and adjusted EPS cannot be predicted with certainty, this revised outlook reflects our current expectation of trends through the balance of the fiscal year.”

EBIT over the nine months rose 5% to $940m (GAPP), while EPS was up 4% at $1.66.

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