Campbell Soup Company
) reported disappointing first-quarter fiscal 2014 results with
adjusted earnings from continuing operations declining 21% year
over year to 66 cents per share. Moreover, the earnings of this
high-quality foods and simple meals manufacturer was much lower
than the Zacks Consensus Estimate of 87 cents per share.
On a reported basis, earnings from continuing operations came
in at 57 cents per share for the quarter as against 73 cents in
the year-ago comparable quarter. The company's bottom-line
results were primarily battered by the late Thanksgiving holiday,
weakness in core business categories, higher marketing expenses
and recall of Plum Organics pouch products.
Net sales fell 2% to $2,165 million from the prior-year
quarter and missed the Zacks Consensus Estimate of $2,307
million. Moreover, organic sales witnessed a year-over-year
decline of 4% primarily due to a negative impact of movements in
retailer inventory level due to a late Thanksgiving holiday. This
resulted in a shift in shipments to the second quarter of fiscal
During the quarter, acquisitions contributed 4% while price
and sales allowances contributed 1% to net sales. However, these
were offset by 4% decline in volume and mix and the negative
impact of 1% for each increase in promotional spending and
Adjusted gross margin of 36.0% declined 220 basis points (bps)
from the prior-year quarter level of 38.2%, mainly due to
acquisitions, product recalls of Plum Organics and an unfavorable
mix. Moreover, in dollar terms, adjusted gross profit declined 7%
year over year to $779 million.
In the reported quarter, marketing and selling expenses
increased 11% year over year to $261 million. This was primarily
due to higher advertising and consumer promotion expenses related
to product launches and promotion of the Bolthouse Farms
Adjusted operating income decreased 20% year over year to $337
million, mainly due to lower sales, increased advertising
expenses, negative impact from Plum Organics product recalls and
reduced gross profit.
U.S. Simple Meals:
First-quarter sales at this division decreased 4% year over year
to $860 million. This was mainly due to 6% decline in volume and
mix as well as higher promotional spending, partially offset by
increased price and sales allowances and positive impact from the
acquisition of Plum Organics.
Sales of U.S. Soup declined 6% due to higher retailer
inventory levels. Sales of ready-to-serve soup and condensed soup
fell 11% and 7%, respectively, while Broth sales increased 3%.
Sales of U.S. Sauces increased 4% from the year-ago quarter.
However, if we exclude the impact of recent acquisitions, sales
of U.S. Sauces declined 4%.
During the quarter, operating income fell 23% year over year
to $211 million, primarily due to lower volumes, rise in
advertisement and promotional expenses as well as negative impact
from Plum Organics product recalls, partially offset by higher
selling prices and improved productivity.
Sales at this division fell 8% year over year to $173 million due
to a 9% decline in volume and mix as well as 1% fall in price and
sales allowances, partly offset by decline of 2% in promotional
spending. Sales decline in "V8" and "V8 V-Fusion" juices and
juice beverages as well as "V8 Splash" juice led to the fall.
The segment's operating income in the quarter declined 20.0%
year over year to $24 million primarily due to lower volumes.
Global Baking and Snacking:
This segment's sales increased 6% to $609 million. Results
primarily benefited from the Kelsen Group acquisition and a 2%
rise in price and sales allowances, offset by a negative impact
of 3% from unfavorable currency exchange rates and 2% from higher
However, segment operating income declined 8% year over year
to $78 million, primarily due to rise in input costs and
promotional spending, partly offset by higher selling prices.
International Simple Meals and Beverages:
Sales of this segment fell 13% to $193 million, primarily due to
a 3% decrease in volume and mix, 5% negative impact of currency
translation, 2% fall in price and sales allowances and 2% due to
rise in promotional spending. The segment witnessed sales decline
in every region.
The segment's operating income of $20 million was down 39%
from the year-ago period mainly due to lower volume, reduced
selling prices and higher promotional spending.
Bolthouse and Foodservice:
This segment comprises Bolthouse Farms business, which was
acquired on Aug 6, 2012, and the North America Foodservice
business. This division's quarterly sales were $330 million, down
2% from the comparable year-ago quarter.
Due to higher input costs and increased advertising expenses
for Bolthouse Farms, the segment's operating income fell $5
million to $29 million.
Disappointed with its first-quarter results, Campbell Soup
lowered the guidance for fiscal 2014. The company now expects
sales from continuing operations to increase by 4%-5% versus
5%-6% forecasted earlier. Adjusted earnings before interest and
tax (EBIT) is projected to grow by 4%-6% compared with its
earlier guidance of 5%-7%.
Moreover, the company lowered its adjusted earnings growth
guidance range to 2%-4% from 3%-5% forecasted earlier. The
company now expects fiscal 2014 earnings to come in between $2.53
and $2.58 per share.
Other Stocks to Consider
Currently, Campbell Soup carries a Zacks Rank #3 (Hold). Other
stocks performing well in the food space include
Omega Protein Corp.
Pinnacle Foods Inc.
The J. M. Smucker Co.
). While Omega carries a Zacks Rank #1 (Strong Buy), both
Pinnacle and J. M. Smucker have a Zacks Rank #2 (Buy).
CAMPBELL SOUP (CPB): Free Stock Analysis
OMEGA PROTEIN (OME): Free Stock Analysis
PINNACLE FOODS (PF): Free Stock Analysis
SMUCKER JM (SJM): Free Stock Analysis Report
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