Campbell Soup Co. has cut its forecast for annual sales and profits after a “disappointing” first quarter.
The US food group producer recorded earnings of US$172m in the three months ended 27 October, compared to $245m a year earlier.
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Campbell blamed the decline on restructuring-related costs, as well as on tax expenses and foreign currency hedging costs associated with the sale of its European simple meals business.
EBIT in the period fell 17.1% to $305m, while sales slumped 56.5% to $2.16bn. Organic sales were down 4% as a result of “movements in retailer inventory levels” across several of the company’s businesses, it said. Sales in all but one of Campbell’s segments – global baking and snacking – dropped in the quarter.
“I’m disappointed in Campbell’s first-quarter performance,” said CEO Denise Morrison. “While we anticipated a challenging first quarter, the impact from retailer inventory movements was greater than anticipated and accounted for more than half of the decline in organic sales. This was most acute in US soup.
“Another significant factor impacting our performance was our decision to front-load marketing spending in the first quarter to support new products in US soup and simple meals and to invest in marketing our Bolthouse Farms brand.”
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By GlobalDataTotal advertising and consumer promotion expenses increased 14% in the quarter versus the prior year.
Campbell lowered its full-year forecasts for sales and profits. It now expects adjusted earnings to grow 2% to 4% to $2.53 to $2.58 per share, while sales are forecast to increase 4% to 5%. In August, the company had targeted an earnings increase of 3% to 5% and sales growth of 5% to 6%.
Shares in Campbell were down over 5% in pre-market trading before the New York Stock Exchange opened.
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