Campbell Soup Co. has remained upbeat on the outlook for its current fiscal year despite posting a 15% drop in second-quarter profit.
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In an earnings release today (23 February), the company said it earned US$233m, down from US$274m in the same period a year ago.
Excluding one-time items relating to restructuring, taxes and the company’s sale of the Godiva Chocolatier business, Campbell’s earnings totalled $234m, down from $266m a year ago.
Sales dropped by around 4%, dipping to $2.12bn during the period.
However, speaking on a conference call with analysts, Campbell president and CEO Douglas Conant remained upbeat.
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By GlobalData“Consumers have clearly responded well to our focus on wellness and quality and our increased marketing spending behind soup,” he said.
“Overall we will weather the storm better than most companies, given our focused portfolio and our relative brand strength,” he predicted.
Conant said that Campbell’s second quarter performance was adversely impacted by the move from a number of major US customers to reduce inventory levels, meaning that higher levels of consumer take-home were not reflected in Campbell’s sales levels.
“These retailers made executive decisions across their whole network that they were going to reduce inventory as they hit the end of their calendar year,” he said.
“Some of them delivered very strong performances on the strength of that decision. However, some categories and companies may have been adversely affected. We were one of those. Our growth was slowed as a result of this. The good news is our consumer takeaway held up very well and our performance for the half was solid. We missed an opportunity there.”
According to Campbell, on average most of its trade customers carry about 2-3 weeks stock. The de-load seen in the second quarter represented about three days worth of sales, the company indicated.
Conant said that retailers were now expected to keep their inventories stable going into the third quarter.
Looking to the full year, Conant conceded: “The top line guidance is now slightly lower – largely associated with retailer inventory destocking.”
However, Conant added that the company was able to improve its bottom line.
On a currency-neutral basis, Campbell said it expects to deliver sales growth, excluding the negative impact of one less week in the fiscal year and divestitures, within its long-term target range of 3-4%.
Adjusted earnings before interest and taxes (EBIT) is expected to come in just below its long-term growth target of 5-6%, reflecting the impact of one less week, higher marketing spending and increased investment spending in Russia and China.
Nevertheless, Campbell said it expects growth in adjusted net EPS to be at the high end of the 5-7% range, reflecting improved margin outlook and favourable interest costs.
