Campbell Soup Q1 profit slides as key shareholder vote looms
- Campbell Soup said sales during its first quarter rose 25% to $2.69 billion, compared to the same period a year earlier, as the company benefited from the purchase of snack maker Snyder’s-Lance. Analysts projected revenue of $2.67 billion. Profit declined to $194 million compared to $275 million last year, as the company faced higher costs tied to promotional spending and supply chain expenses. Organic growth, which removed items such as acquisitions and changes in currency, fell 3%.
- The New Jersey company said sales in its meals and beverages segment, which includes soup, Prego, V8 and Swanson, were similar to a year earlier at $1.2 billion. Sales in its global biscuits and snacks segment rose 77% to $1.22 billion due to the purchase of Snyder’s-Lance in March. Campbell's fresh foods unit continued to struggle with sales falling 1% to $232 million.
- "We continue to expect fiscal 2019 to be a transition year as we fully operationalize our plans to turn around Campbell," Keith McLoughlin, interim president and CEO, said in a statement. "We remain focused on executing our strategic initiatives and confident that our go-forward plan will drive long-term organic growth and profitability that maximizes value for all shareholders.”
The soup and snacks maker has had a tough 2018, punctuated by the departure of its longtime CEO, activist pressure from Dan Loeb who has pushed to replace board members and sell the company, and struggles in several of its businesses with the broader push toward healthier, fresher foods.
During its first quarter, Campbell Soup highlighted some of challenges it continues to face, especially in its iconic soup division — but offered fresh evidence that it is on the right track to turn its business around.
"Stabilizing soup is our top priority given the importance of this business," McLoughlin told analysts. "We're doing the right things and are encouraged that our plans are beginning to have an impact."
Excluding the benefit from the acquisition of Pacific Foods in 2017 and the impact from the adoption of new accounting guidance for revenue, sales of U.S. soup decreased 6% as the product was hit with competitive pressures and increased promotional spending.
In snacks, excluding the benefit from the acquisition of Snyder’s-Lance and the negative impact of currency, organic sales fell 1%, driven primarily by U.S. declines in Kelsen cookies. Sales of Goldfish crackers increased slightly. The fresh segment, once viewed as an opportunity for growth for Campbell Soup, struggled as declines in refrigerated soup, as well as in Garden Fresh Gourmet and Bolthouse Farms refrigerated beverages, were partly offset by gains in carrots.
In August, Campbell Soup announced its decision to sell the fresh business and international operations to pay down debt, reduce costs and sharpen focus. McLoughlin said Wednesday that both divisions "have garnered strong interest from a range of potential buyers."
Bloomberg reported on Monday that Mondelez International has hired Morgan Stanley to help the company in its pursuit of Campbell's Arnott's Biscuits and Kelsen Group. A sale, which could yield as much as $3 billion, would help the company pay down its debt after an active year in M&A while enabling the New Jersey company to focus more of its attention on its U.S. operations.
Selling off the fresh division — which the company has bulked up in recent years through a string of deals — could also give Campbell Soup more financial flexibility. The unit, which includes Bolthouse Farms and Garden Fresh Gourmet, has seen its value written down by $1 billion. Bolthouse's former CEO is reportedly among those interested in the segment.
While some of Campbell Soup's problems are self-inflicted, it's facing many of the same problems as other food companies that are watching consumers flock toward healthier, fresher products. Despite this push, the decision to unload its fresh and international divisions is a sound move that would enable the maker of Goldfish crackers, Pop Secret popcorn, Emerald nuts and Pepperidge Farm cookies to focus on areas where the company has significant expertise — without the distractions.
Campbell Soup still has to appoint a new CEO to fill the interim post being held by McLoughlin, who joined the company's board in 2016. In addition, the company is scheduled to hold its annual meeting Nov. 29, where shareholders are expected to vote on Loeb's push to replace five members of Campbell Soup's board. An overhaul of the board, which has been backed by independent shareholder advisory firms, could open the company to a more dramatic overhaul, including a potential sale.
The company offered shareholders a sign that conditions may be improving. During the quarter, McLoughlin said Campbell Soup started to see "improved trends" in U.S. soup, a return to sales growth in V8 and "continued solid performance" in Campbell Snacks.
Campbell Soup maintained its guidance outlook for its 2019 fiscal year, predicating sales of between $9.98 billion to $10.1 billion before any divestitures. A favorable outlook comes at an ideal time — just a week before the shareholders' meeting. But with Loeb looming and shareholders eager of an upswing in the company's beleaguered stock price, the pressure is on Campbell Soup to perform.
- Campbell Soup Campbell Reports First-Quarter Results
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