Campbell Soup Posts Upbeat Q3 Earnings, Despite Drop in Sales

25 May 2015 --- Campbell Soup Company has reported its results for the third quarter of fiscal 2015. Sales decreased 4 percent to $1.9 billion, primarily due to the negative impact of currency translation. Organic sales decreased 1 percent with lower volume, partly offset by lower promotional spending and higher selling prices.

Gross margin increased from 34.3 percent to 35.9 percent. Excluding items impacting comparability in the prior year, gross margin improved 0.7 percentage points. The increase in adjusted gross margin was due to productivity improvements, lower promotional spending and higher selling prices, partly offset by cost inflation and other supply chain costs.

Marketing and selling expenses decreased 2 percent to $213 million, primarily driven by the impact of currency translation and lower marketing overhead expenses, partly offset by increased advertising and consumer promotion expenses. Administrative expenses increased 5 percent to $141 million. Excluding $9 million of costs related to the implementation of the new organizational structure and cost reduction initiatives, adjusted administrative expenses decreased 1 percent to $132 million.

Denise Morrison, Campbell’s President and Chief Executive Officer, said, “In the third quarter, gross margin improved and adjusted EBIT and EPS were better than expected. Sales declined, primarily due to unfavorable currency and the impact of retailer inventory movements on our U.S. soup business.

“Our focus on gross margin performance began to pay dividends, as we expanded margins in a challenging environment. In addition to our productivity improvements and moderating inflation, we achieved net price realization by reducing promotional spending and taking pricing actions on the core businesses. We also made progress in addressing many of the supply chain issues we faced in the first half. Most importantly, several of our businesses delivered strong operating earnings, including the Bolthouse and Foodservice segment. I am especially satisfied with the top- and bottom-line results of our Global Baking and Snacking segment.

“In the quarter, we also made progress against our strategic enterprise redesign, including our cost reduction initiative. We believe that a strategy that focuses on driving growth, aggressively reducing costs and reinvesting a portion of the savings in the areas of our business with the greatest growth potential is the best way to create shareholder value over time.”

Campbell now expects a year-over-year change in sales closer to the lower end of the previously announced range of -1 to +1 percent; a change in adjusted EBIT closer to the favorable end of the previously announced range of -7 to -5 percent; and a change in adjusted EPS closer to the favorable end of the previously announced range of -5 to -3 percent or $2.32 to $2.38 per share. This guidance includes an estimated 2-point negative impact from currency translation and is based on an adjusted 52-week 2014 base.