Campbell Soup Co. reported full-year earnings within its guidance but noted a challenging business environment in the packaged foods industry amid changing consumer preferences.
Sales were pretty much flat on both an accounting and organic basis, falling 1% to US$7.9bn in the 12 months ended 30 July from a year earlier, the maker of Campbell’s soups said in a statement today (31 August). The decline reflected lower volumes and higher promotional spending.
The New Jersey-based firm posted a 46% increase in reported EBIT to $1.4bn, which amounted to an adjusted 2% gain to reflect a “higher adjusted gross margin and lower adjusted administrative expenses, due in part to lower incentive compensation costs, partly offset by lower sales volume”.
Adjusted diluted earnings per share rose 3% to $3.04.
Commenting on the results, president and CEO Denise Morrison, said: “The operating environment for the packaged foods industry remains challenging due to shifting demographics, changing consumer preferences for food, the adoption of new shopping behaviours and the dynamic retailer landscape. In these times, sales growth remains a challenge.”
Looking forward to fiscal 2018, Campbells expects sales to be flat at best or decline by up to 2%, and EBIT to change by plus or minus 1%, assuming the impact from currency translations is “nominal”. Adjusted EPS is seen at flat to down 2% ($3.04-$3.11).
The businesses segments essentially mirrored the overall performance. The major Americas Simple Meals and Beverages sector generated full-year revenue of $4.3bn – down 1% – and Global Biscuits and Snacks brought in $2.6bn, which represented an increase of 1%.
It was a different story for Campbell’s Fresh, which saw revenue drop 5% to $967m but CEO Morrison said a new leadership team has “taken steps to enhance our quality processes and address capacity constraints toward our objective of returning the division to growth”.
Morrison also said progress was made during the year, including “increasing multi-year cost savings initiative to $450m by the end of fiscal 2020”.
In July, the company paid $700m for Pacific Foods to gain access to the “faster-growing health and well-being categories” and Morrison said today the acquisition will “add a purpose-driven, real food brand with a solid track record of growth to our portfolio”.
“We expect the operating environment to remain difficult,” Morrison said. “We will continue to position Campbell for long-term growth by managing costs aggressively and re-investing a portion of those savings back in the business with a focus on our strategic imperatives of real food, digital and e-commerce, health and well-being, and snacking.”