Campbell Reports Earnings up 50 Percent Despite Weak Soup Sales

23 Nov 2016 --- Campbell Soup has reported that its first quarter earnings were up over 50 percent to $292m, despite the soup giant continuing to suffer from weak soup sales.

Overall, sales in the quarter came in at $2.202bn, around level with the previous year, as Campbell’s performance was helped by favorable currency translations.

But organic sales were down one percent, driven by declines in Campbell Fresh, which was partly offset by gains in Snacks and Global Biscuits.

Campbell’s financial performance was also hurt by supply constraints relating to its decision to recall some of its Bolthouse Farms drinks.

Campbell Soup is grappling with the challenge of an increasing number of people shopping online instead of grocery stores, where the bulk of Campbell sales are made.

Denise Morrison, chief executive of Campbell Soup, said: “That pressure is not limited to manufacturers. Retailers, too, are taking actions to reposition themselves for growth through consolidation, management changes and increased investments in eCommerce.”

By division, across Americas Simple Meals and Beverages, sales came in at $1.297, comparable with the year previous, with gains in plum products offset by declines in V8 beverages. Sales of soups did not improve on the year previous, with declines in condensed soups.

Across Global Biscuits and Snacks, sales were up three percent to $671m, helped by gains in Pepperidge Farm. 

But earnings across the division were down two percent to $112m, as it was hit by increased advertising costs.

Across Campbell Fresh, sales were down six percent to $234 million primarily driven by lower sales of Bolthouse Farms refrigerated beverages following the recall of products and its mistiming of the decision to of harvest carrots, partly offset by gains in refrigerated soups.

Earnings decreased from $18 million to $1 million reflecting increased carrot and beverage supply chain costs, as well as lower sales volumes.

In recent times, Campbell Soup has looked to invest in healthier brands in recent years, such as Garden Fresh Gourmet and Bolthouse Farms, as it looks to reflect changing consumer tastes.

Morrison added: “Fiscal 2017 is off to a solid start relative to our expectations. We continue to execute against our strategic imperatives, reinvest in our business to stimulate topline growth and aggressively manage our costs.”

“We delivered expanded gross margin, and adjusted EBIT and EPS growth cycling a strong year-ago quarter. As expected, organic sales were down slightly compared to the prior year, due to the performance of Campbell Fresh.”

“Campbell Fresh continues to rebuild capacity for Bolthouse Farms Protein PLUS drinks following a voluntary recall last quarter, and remains focused on working to regain lost carrot customers over time with improved quality.”

“Looking ahead, I remain optimistic about plans to accelerate growth with improving trends in US soup and the upcoming launch of Well Yes! ready-to-serve soup, continued strong performance in Pepperidge Farm and a return to growth in Campbell Fresh. Our guidance for the year remains unchanged.”