Campbell’s Soup released its third-quarter results and updated full-year guidance this morning. Shares of the company (Ticker: CPB) are trading down close to 7% pre-market as of 8am ET as investors react to the results:
- Net Sales decreased 11% as a result of lapping the demand surge at the onset of the pandemic in the prior year.
- Earnings Before Interest and Taxes (EBIT) was $272 million, comparable to prior year. Adjusted EBIT decreased 27% to $283 million.
- Earnings Per Share (EPS) from Continuing Operations decreased 2% to $0.54. Adjusted EPS decreased 31% to $0.57.
- Nearly 75% of brand portfolio grew or held share highlighting strong brand health and continued momentum.
During the pandemic, Campbell Soup and other CPG companies were winning back customers who were reaching for comfort food and pantry staples. However, as the economy began opening back up, COVID-19 purchasing trends began to wane.
KEY THIRD QUARTER RESULTS
With the decrease, Campbell’s net sales were $1.98 billion, while organic net sales decreased 12%.
Gross margin also decreased to 31.7% from 34.5% last year. Excluding items impacting comparability, adjusted gross margin decreased 290 basis points to 31.8% as higher cost inflation and other supply chain costs, as well as unfavorable mix and reduced operating leverage were partially offset by a net benefit from the change in mark-to-market adjustments on outstanding commodity hedges, supply chain productivity improvements and cost savings initiatives.
NOTES FROM CEO
Mark Clouse, Campbell’s President and CEO, said, “While we recognized the third quarter would be a challenging net sales comparison to the demand surge at the onset of the COVID-19 pandemic a year ago, we faced additional headwinds.”
He noted that results were impacted by a rising inflationary environment, short-term increases in supply chain costs, and some executional pressures as the company continued to advance its transformation agenda, primarily in the snacks division. “We are confident that these are all addressable, and we are taking appropriate actions, including putting pricing in place for the next fiscal year,” he said. “Our confidence is further strengthened by the underlying health of our brands.”
Clouse emphasized that nearly three-quarters of the brand’s portfolio gained or held share in the quarter, with most core categories having grown at higher rates than pre-pandemic levels.
UPDATED FULL-YEAR GUIDANCE
Campbell updated its full-year fiscal 2021 guidance, noting the following:
- Net Sales: -3.5% to -3.0%
- Adjusted EBIT: -5% TO -4%
- Adjusted EPS: $2.90 to $2.93
In the fourth quarter, the company expects continued margin pressure related to its transition out of the COVID-19 environment, and more pronounced inflation while pricing actions take hold in the beginning of fiscal 2022.
