Campbell Reports First-Quarter Fiscal 2023 Results

CAMDEN, N.J.–(BUSINESS WIRE)–Campbell Soup Company (NYSE:CPB) today reported results for its first-quarter fiscal 2023. 

CEO Comments

“Our strong first-quarter results reflect our continued success in driving the relevance of our brands and improving our execution across our supply chain,” said Campbell’s President and CEO Mark Clouse. “Through a combination of inflation-driven pricing actions and productivity improvements, we have substantially mitigated significant inflationary pressure in the quarter while continuing to provide quality and value to consumers. We are investing in the equity of our brands through effective marketing, delivering robust innovation and deploying efficient capital spending to ensure we continue to fuel improving in-market shares and growth. With the momentum of our strong first-quarter performance and confidence in our strengthened supply chain, we are raising our full-year fiscal 2023 guidance while taking into account the volatile economic environment.”

Three Months Ended

($ in millions, except per share)

October 30,

2022

October 31,

2021

% Change

Net Sales

As Reported (GAAP)

$2,575

$2,236

15%

Organic

15%

Earnings Before Interest and Taxes (EBIT)

As Reported (GAAP)

$436

$376

16%

Adjusted

$449

$389

15%

Diluted Earnings Per Share

As Reported (GAAP)

$0.99

$0.86

15%

Adjusted

$1.02

$0.89

15%

Note: A detailed reconciliation of the reported (GAAP) financial information to the adjusted financial information is included at the end of this news release.

Items Impacting Comparability

The table below presents a summary of items impacting comparability in each period. A detailed reconciliation of the reported (GAAP) financial information to the adjusted information is included at the end of this news release.

Diluted Earnings Per Share

Three Months Ended

October 30,

2022

October 31,

2021

As Reported (GAAP)

$0.99

$0.86

Restructuring charges, implementation costs and other related costs associated with cost savings initiatives

$0.01

$0.01

Pension and postretirement adjustments

$0.04

$0.02

Commodity mark-to-market adjustments

$(0.01

)

$0.01

Adjusted*

$1.02

$0.89

*Numbers may not add due to rounding.

First-Quarter Results

Net sales in the quarter, both as reported and organic, increased 15% versus the prior year to $2.6 billion. The combined impact of inflation-driven pricing and sales allowances more than offset volume declines.

Gross profit increased to $834 million from $722 million in the prior year. As a percent of sales, gross profit margin was 32.4% compared to 32.3% in the prior year. Excluding items impacting comparability, adjusted gross profit increased to $829 million from $727 million. Excluding items impacting comparability, adjusted gross profit margin decreased 30 basis points to 32.2% as continued cost inflation and higher other supply chain costs as well as unfavorable volume / mix were mostly mitigated by inflation-driven pricing actions and productivity improvements.

Marketing and selling expenses increased 18% to $201 million and represented approximately 8% of net sales. The increase was driven by higher advertising and consumer promotion expense (A&C), which increased 31% versus moderated levels in the prior year, and higher selling expenses, partially offset by increased benefits from cost savings initiatives.

Administrative expenses, on both a reported and an adjusted basis, increased 1% to $158 million and $155 million, respectively.

Other expenses were $18 million compared to other income of $1 million in the prior year. Excluding items impacting comparability, adjusted other expenses were $3 million compared to other income of $7 million in the prior year primarily due to lower pension and postretirement benefit income.

As reported EBIT increased to $436 million from $376 million in the prior year. Excluding items impacting comparability, adjusted EBIT increased 15% compared to the prior year to $449 million primarily due to higher adjusted gross profit, partially offset by higher marketing and selling expenses and higher adjusted other expenses.

Net interest expense was $46 million compared to $47 million in the prior year. The tax rate was 23.8% compared to 20.7% in the prior year. Excluding items impacting comparability, the adjusted tax rate was 23.8% compared to 20.8% in the prior year primarily due to the favorable resolution of several tax matters in the prior year.

As reported EPS increased to $0.99 per share compared to $0.86 per share in the prior year. Excluding items impacting comparability, adjusted EPS increased $0.13, or 15%, compared to the prior year to $1.02 primarily reflecting the increase in adjusted EBIT, partially offset by a higher adjusted effective tax rate.

Cash flow from operations decreased from $288 million in the prior year to $227 million primarily due to changes in working capital, partially offset by higher cash earnings. Capital expenditures were $77 million compared to $69 million in the prior year. In line with the company’s commitment to return value to its shareholders, the company paid $115 million of cash dividends and repurchased common stock of approximately $41 million. At the end of the first quarter, the company had approximately $375 million remaining under the current $500 million strategic share repurchase program and approximately $131 million remaining under its $250 million anti-dilutive share repurchase program.

Cost Savings Program from Continuing Operations

In the first quarter, Campbell achieved $10 million of total savings under its multi-year cost savings program, inclusive of Snyder’s-Lance integration synergies, bringing total program-to-date cost savings to $860 million. Campbell remains on track to deliver savings of $1 billion by the end of fiscal 2025.

Full-Year Fiscal 2023 Guidance

Based on the company’s strong first quarter results which reflect continued demand for its products and improved supply chain execution, Campbell is raising its full-year fiscal 2023 net sales, adjusted EBIT and adjusted EPS guidance provided on September 1, 2022, while taking into account the volatile economic environment.

The full-year fiscal 2023 guidance is set forth in the table below:

FY2022

Results

Previous

FY2023

Guidance

Updated

FY2023

Guidance

($ in millions, except per share)

Net Sales

$8,562

+4% to +6%

+7% to +9%

Organic Net Sales

+4% to +6%

+7% to +9%

Adjusted EBIT

$1,297*

+1% to +5%

+2.5% to +6.5%

Adjusted EPS

$2.85*

0% to +4%

+2% to +5%

$2.85 to $2.95

$2.90 to $3.00

* Adjusted – refer to the detailed reconciliation of the reported (GAAP) financial information to the adjusted financial information at the end of this news release.

Note: A non-GAAP reconciliation is not provided for fiscal 2023 guidance as the company is unable to reasonably estimate the full-year financial impact of items such as actuarial gains or losses on pension and postretirement plans because these impacts are dependent on future changes in market conditions. The inability to predict the amount and timing of these future items makes a detailed reconciliation of these forward-looking financial measures impracticable.

Segment Operating Review

An analysis of net sales and operating earnings by reportable segment follows:

Three Months Ended October 30, 2022

($ in millions)

Meals & Beverages*

Snacks

Total

Net Sales, as Reported

$1,455

$1,120

$2,575

Volume and Mix

(1)%

(2)%

(1)%

Price and Sales Allowances

15%

18%

16%

Promotional Spending

1%

(1)%

—%

Organic Net Sales

15%

15%

15%

Currency

(1)%

—%

—%

% Change vs. Prior Year

15%

15%

15%

Segment Operating Earnings

$331

$153

% Change vs. Prior Year

18%

20%

*Numbers do not add due to rounding.

Note: A detailed reconciliation of the reported (GAAP) net sales to organic net sales is included at the end of this news release.

Meals & Beverages

Net sales, both reported and organic, increased 15% in the quarter primarily due to increases in U.S. retail products, including U.S. soup and Prego pasta sauces, as well as gains in foodservice. Inflation-driven pricing and sales allowances and lower levels of promotional spending were partially offset by volume declines. Sales of U.S. soup increased 11% due to sales increases in ready-to-serve soups, condensed soups and broth.

Operating earnings in the quarter increased 18% primarily due to higher gross profit, partially offset by higher marketing and selling expenses. Gross profit margin increased driven by the impact of inflation-driven pricing actions, supply chain productivity improvements and lower levels of promotional spending, partially offset by higher cost inflation and other supply chain costs and unfavorable volume / mix.

Snacks

Net sales, both reported and organic, increased 15% driven by sales of power brands, which were up 21%. Sales growth was driven by increases in cookies and crackers, primarily Goldfish crackers, and in salty snacks, primarily Snyder’s of Hanover pretzels, and both Kettle Brand and Cape Cod potato chips. Inflation-driven pricing and sales allowances were partly offset by volume declines and increased promotional spending relative to moderated levels in the prior-year quarter.

Operating earnings in the quarter increased 20% primarily due to higher gross profit and lower administrative expenses, partially offset by higher marketing and selling expenses. Gross profit margin decreased driven by higher cost inflation and other supply chain costs, unfavorable volume / mix and higher levels of promotional spending, partially offset by the impact of inflation-driven pricing actions and supply chain productivity improvements.

Corporate

Corporate expense was $48 million in the first quarter of fiscal 2023 compared to $32 million in the prior year. Corporate expense in the current quarter included pension actuarial losses of $15 million, costs of $3 million related to cost savings initiatives and unrealized mark-to-market gains on outstanding undesignated commodity hedges of $5 million. Corporate expense in the first quarter of fiscal 2022 included pension actuarial losses of $6 million, costs of $4 million related to cost savings initiatives and unrealized mark-to-market losses on outstanding undesignated commodity hedges of $3 million. After factoring in these items, the remaining increase in Corporate expense was primarily due to lower pension and postretirement benefit income.

Reportable Segments

Campbell Soup Company earnings results are reported as follows:

Meals & Beverages, which consists of our soup, simple meals and beverage products in retail and foodservice in U.S. and Canada. The segment includes the following products: Campbell’s condensed and ready-to-serve soups; Swanson broth and stocks; Pacific Foods broth, soups and non-dairy beverages; Prego pasta sauces; Pace Mexican sauces; Campbell’s gravies, pasta, beans and dinner sauces; Swanson canned poultry; V8 juices and beverages; and Campbell’s tomato juice. The segment also includes snacking products in foodservice and Canada.

Snacks, which consists of Pepperidge Farm cookies*, crackers, fresh bakery and frozen products, including Goldfish crackers*, Snyder’s of Hanover pretzels*, Lance sandwich crackers*, Cape Cod potato chips*, Kettle Brand potato chips*, Late July snacks*, Snack Factory pretzel crisps*, Pop Secret popcorn, Emerald nuts, and other snacking products in retail in the U.S. We refer to the * brands as our “power brands.” The segment also includes the retail business in Latin America.

About Campbell Soup Company

For more than 150 years, Campbell (NYSE:CPB) has been connecting people through food they love. Generations of consumers have trusted Campbell to provide delicious and affordable food and beverages. Headquartered in Camden, N.J. since 1869, Campbell generated fiscal 2022 net sales of nearly $8.6 billion. Our portfolio includes iconic brands such as Campbell’s, Cape Cod, Goldfish, Kettle Brand, Lance, Late July, Milano, Pace, Pacific Foods, Pepperidge FarmPrego, Snyder’s of Hanover, Swanson and V8. Campbell has a heritage of giving back and acting as a good steward of the environment. The company is a member of the Standard & Poor’s 500 as well as the FTSE4Good and Bloomberg Gender-Equality Indices. For more information, visit www.campbellsoupcompany.com or follow company news on Twitter via @CampbellSoupCo.