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Campbell Posts Mixed Results

- By Mrinalini Chaudhuri

Campbell Soup Co.(CPB), the maker of high-quality soups and simple meals, beverages and snacks, recently reported second-quarter results. Although sales did not meet expectations, it performed well in the soup and simple meals businesses. There was an increase in the U.S. soup sales and ready-to-serve items during the quarter. The gross margin increased due to productivity improvements and cost savings initiatives. Campbell Fresh did not fare well due to increased carrot costs from the adverse impact on crop yields heavy rains had in December and January.

Second-quarter performance

Sales decreased 1% to $2.171 billion during the quarter, which was $2.201 billion in the prior-year quarter. Organic sales decreased 2%.

The gross margin was 38%, up from 37.2% in the comparable quarter the year before.

Marketing and selling expenses increased 6% to $237 million, which was $223 million the year before.

Administrative expenses decreased 5% to $139 million. In the year-ago quarter, the company reported $146 million in administrative expenses.

EBIT was $205 million, a 50% decrease from $414 million in the prior-year quarter.

Net interest expense increased 4% to $28 million.

The tax rate during the quarter was 42.9%, up from 31.5% in the prior-year quarter.

Unallocated corporate expenses for the quarter were $241 million, up from $29 million in the prior-year quarter.

Segment performance

America's Simple Meals and Beverages

Sales during the quarter were $1.231 billion.

The segment's operating earnings increased 8% to $313 million.

Global Biscuits and Snacks

Sales during the quarter were $680 million.

The segment's operating earnings decreased 4% to $135 million.

Campbell Fresh

Sales during the quarter decreased 8% and to $260 million.

The segment's operating loss was $3 million.

First-half results

Sales decreased 1% to $4.373 billion.

EBIT decreased 9% to $662 million.

Net interest expense increased 2% to $56 million.

The tax rate increased by 3.2 percentage points to 35.1%.

Cash flow from operations decreased to $667 million, which was $754 million in the prior-year period.

Expectations for 2017


Sales increase

By 0 to 1%

Adjusted EBIT

To be between 1% and 4%

Adjusted EPS

To be between $3 and $3.09 per share

Tax rate

To be around 32%


  • Cost savings initiative
  • Improve sales performance
  • Create new snacking platforms
  • Optimizing supply chain network
  • Investing in long-term innovation
  • Building an e-commerce platform


Driven by the purpose "Real food that matters for life's moments", the company is known to provide the consumers with authentic, flavorful and readily available foods and beverages, with flagship brands like Pepperidge Farm, Bolthouse Farms, Arnott's, V8, Swanson, Pace and Prego under its umbrella. The snacks market is worth around a whopping $89 billion in the U.S. The company plans to expand its business in this category. As per Future Market Insights, the U.S., being the largest market for convenience foods in the world, will remain a strategic area for convenience food processors in the future.

Campbell's management has increased its savings target from $300 million by the end of fiscal 2018 to $450 million by the end of fiscal 2020. It is trying to drive growth through these cost savings. The company has already launched a comprehensive reorganization and multiyear cost savings program. Although the company did not do well in terms of revenue, I think it will create shareholder returns through its cost curtailment efforts in the long run.

Disclosure: I do not hold any position in the company.

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This article first appeared on GuruFocus.