Campbell Soup capitalizing on snack trends | Food Business News

By September 3, 2019Snack
Source: Campbell Soup Co.

The Campbell Soup Co. remains in turnaround mode as management guides the business through a series of divestitures intended to create a more focused and efficient company. While Campbell Soup’s quarterly and end-of-year financial results reflect the ongoing challenges facing the company, its Snacks and Meals & Beverages business units produced promising results.

“We have clearly stabilized the company from where we were a year ago and delivered improved performance over the course of the year,” said Mark A. Clouse, president and chief executive officer, during a conference call with securities analysts on Aug. 30. “By no means are we declaring victory. We have much to do to continue to strengthen our businesses, improve our marketing and innovation and demonstrate executional excellence consistently.”

Net income for the year ended July 28 totaled $211 million, equal to $1.57 per share on the common stock, down 19% from the previous year when the company earned $261 million, or $2.41 per share.

Sales for the year rose to $8,107 million from $6,615 million the year prior. The 23% sales increase reflects the acquisitions of Snyder’s-Lance and Pacific Foods, according to the company. Organic sales were comparable to the previous fiscal year.

For the fourth quarter, the company recorded a loss of $8 million, which compared unfavorably to the previous year when Campbell Soup earned $94 million, equal to 42c per share.

Sales for the quarter ticked up slightly to $1,780 million from $1,745 million.

The quarterly loss was attributable to a variety of charges, including impairment charges against Campbell Soup’s Plum trademark and European chips business, cost savings initiatives and pension and post-retirement mark-to-market losses.

Snack sales during the quarter rose 3% to $967 million. Organic sales rose 4%. The performance reflected continued momentum in Pepperidge Farm bakery products, Kettle Brand potato chips, Snack Factory Pretzel Crisps, and Late July snacks, as well as gains in Goldfish crackers, as the company laps the negative impact of the voluntary recall in July 2018, the company said.

“This year, we have overdelivered our value capture, while simultaneously unlocking the growth potential of this unique and differentiated portfolio by maintaining our momentum in Pepperidge Farm and applying our proven growth model to Snyder’s-Lance,” Mr. Clouse said. “The snacks business is really hitting its stride on both the top and bottom line behind increased marketing investments to fuel sales growth and efficiencies and enablers benefiting operating profit.”

Product lines that performed particularly well during the quarter included Pepperidge Farm, Swirl and Farmhouse cookies, the company said.

Meals and Beverages business sales were $813 million during the quarter. Operating earnings fell 3% to $151 million.

Mr. Clouse said the business unit “stabilized” during the quarter as the company took pricing actions selectively that were offset by cost inflation.

U.S. soup sales rose 3% in the quarter, with gains in condensed and ready-to-serve soups.

“Obviously, the fourth quarter is the smallest of the year, and it’s important to keep in mind that we’re wrapping significant declines from a year ago,” Mr. Clouse said. “However, it’s also great to see end market consumption increase 1.4% in the quarter with strong performance across the portfolio. This represents a significant improvement over the first three quarters.”

Over the next two years the company plans to invest in soup to improve quality, marketing and merchandising.

“We do expect some mitigating headwinds as we continue to rationalize the portfolio and increase some unsustainable promoted price points,” Mr. Clouse said. “As we’ve  said previously, we expect a more stable soup business in fiscal ‘20, with an improved trajectory in fiscal ‘21 that builds upon the fiscal ‘20 learnings and increases an investment in areas that are working or redirects as necessary, complemented by a more robust innovation pipeline. This change will not happen overnight. The soup plan is a three-year journey with fiscal ‘20 being the second phase.”

Campbell Soup management is projecting a 1% to 3% increase in sales in fiscal 2020 over fiscal 2019 and for earnings per share to fall in a range of $2.50 to $2.55.

Assumptions underlying the guidance include cost inflation of approximately 3% during fiscal 2020, an additional $140 million in cost savings, and the anticipated benefit of divestiture proceeds in the range of $290 million to $300 million.

Source: Campbell Soup capitalizing on snack trends | 2019-09-03 | Food Business News