CAMDEN, N.J.–(BUSINESS WIRE)–Campbell Soup Company (NYSE:CPB) today reported results for its second-quarter fiscal 2024 ended January 28, 2024.
CEO Comments
“We once again delivered on our commitments, with a sequential improvement in volume trends and year-over-year operating margin expansion in both our Meals & Beverages and Snacks divisions,” said Campbell’s President and CEO, Mark Clouse. “We are excited about the anticipated completion of the acquisition of Sovos Brands which will bring incremental growth to our Meals & Beverages division and continue the transformation of our highly advantaged portfolio.”
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Three Months Ended |
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Six Months Ended |
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($ in millions, except per share) |
January 28, |
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January 29, |
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% Change |
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January 28, |
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January 29, |
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% Change |
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Net Sales |
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As Reported (GAAP) |
$2,456 |
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$2,485 |
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(1)% |
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$4,974 |
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$5,060 |
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(2)% |
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Organic |
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(1)% |
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(1)% |
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Earnings Before Interest and Taxes (EBIT) |
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As Reported (GAAP) |
$317 |
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$350 |
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(9)% |
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$675 |
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$786 |
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(14)% |
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Adjusted |
$364 |
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$362 |
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1% |
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$771 |
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$812 |
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(5)% |
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Diluted Earnings Per Share |
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As Reported (GAAP) |
$0.68 |
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$0.77 |
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(12)% |
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$1.46 |
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$1.76 |
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(17)% |
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Adjusted |
$0.80 |
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$0.80 |
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—% |
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$1.71 |
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$1.82 |
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(6)% |
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Note: A detailed reconciliation of the reported (GAAP) financial information to the adjusted financial information is included at the end of this news release. |
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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.
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Diluted Earnings Per Share |
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Three Months Ended |
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Six Months Ended |
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January 28, |
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January 29, |
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January 28, |
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January 29, |
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As Reported (GAAP) |
$0.68 |
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$0.77 |
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$1.46 |
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$1.76 |
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Restructuring charges, implementation costs and other related costs associated with cost savings initiatives |
$0.09 |
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$0.03 |
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$0.12 |
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$0.04 |
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Commodity mark-to-market adjustments |
$(0.02) |
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$0.01 |
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$0.02 |
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$— |
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Accelerated amortization |
$0.02 |
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$— |
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$0.03 |
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$— |
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Costs associated with pending acquisition |
$0.03 |
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$— |
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$0.06 |
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$— |
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Plum litigation expenses |
$— |
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$— |
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$0.01 |
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$— |
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Cybersecurity incident costs |
$— |
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$— |
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$0.01 |
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$— |
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Pension actuarial losses (gains) |
$— |
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$(0.01) |
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$— |
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$0.02 |
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Adjusted |
$0.80 |
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$0.80 |
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$1.71 |
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$1.82 |
Second-Quarter Results
Net sales in the quarter decreased 1%. Organic net sales decreased 1% to $2.5 billion, following a 13% increase in the prior year that reflected double-digit inflation-driven net price realization. Although down 2% compared to the prior year, volume / mix improved versus the first quarter as expected and was partially offset by net price realization of 1%. On a two-year CAGR basis, reported and organic net sales grew approximately 5% and 6%, respectively.
Gross profit increased to $776 million from $759 million. Gross profit margin was 31.6% compared to 30.5%. Excluding items impacting comparability, adjusted gross profit was $772 million compared to $763 million in the prior year. Adjusted gross profit margin increased 70 basis points to 31.4% driven by supply chain productivity improvements, net price realization, the benefit from cost savings initiatives and favorable volume / mix which combined more than offset higher cost inflation and other supply chain costs.
Marketing and selling expenses were comparable to the prior year at $217 million and represented approximately 9% of net sales. Higher selling expenses were offset by 6% lower advertising and consumer promotion expense, driven by Meals & Beverages.
Administrative expenses increased 17% to $189 million. Excluding items impacting comparability, adjusted administrative expenses increased 1% to $159 million primarily due to higher general and administrative costs and inflation, mostly offset by benefits from cost savings initiatives.
Other expenses were $26 million compared to $0 million in the prior year. Excluding items impacting comparability, adjusted other expenses were $9 million compared to $6 million in the prior year primarily due to lower benefits from pension and postretirement income.
As reported EBIT decreased to $317 million from $350 million. Excluding items impacting comparability, adjusted EBIT increased 1% to $364 million primarily due to higher adjusted gross profit, partially offset by higher adjusted other expenses, higher adjusted research and development expenses and higher adjusted administrative expenses.
Net interest expense was $46 million compared to $45 million. The effective tax rate was 25.1% compared to 23.9%. Excluding items impacting comparability, the adjusted effective tax rate increased 50 basis points to 24.5%.
As reported EPS were $0.68 per share compared to $0.77 per share. Excluding items impacting comparability, adjusted EPS of $0.80 per share were comparable to prior year reflecting a slight increase in EBIT, and a reduction in the weighted average diluted shares outstanding partially offset by a higher adjusted effective tax rate.
First-Half Results
Net sales decreased 2% and organic net sales decreased 1% to $5.0 billion with unfavorable volume / mix partially offset by the benefit of net price realization. On a two-year CAGR basis, reported and organic net sales each grew approximately 6%.
As reported EBIT decreased 14% to $675 million. Excluding items impacting comparability, adjusted EBIT decreased 5% to $771 million primarily due to higher adjusted marketing and selling expenses, lower adjusted gross profit and higher adjusted other expenses.
Net interest expense was $94 million compared to $91 million. The effective tax rate was 24.8% compared to 23.9%. Excluding items impacting comparability, the adjusted effective tax rate increased to 24.4% compared to 23.9% in the prior year.
As reported EPS increased to $1.46 per share compared to $1.76 per share. Excluding items impacting comparability, adjusted EPS decreased $0.11, or 6%, to $1.71 per share primarily reflecting the decrease in adjusted EBIT, higher net interest expense and a higher adjusted effective tax rate, partially offset by a reduction in the weighted average diluted shares outstanding.
Cash flow from operations was $684 million compared to $732 million primarily due to lower cash earnings. Capital expenditures were $263 million compared to $155 million in the prior year. In line with Campbell’s commitment to return value to its shareholders, the company paid $224 million of cash dividends and repurchased common stock of approximately $29 million. At the end of the second quarter, the company had approximately $301 million remaining under the current $500 million strategic share repurchase program and approximately $75 million remaining under its $250 million anti-dilutive share repurchase program.
Cost Savings Program from Continuing Operations
Through the second quarter, Campbell has achieved $915 million of total savings under its multi-year cost savings program, inclusive of Snyder’s-Lance synergies. The company remains on track to deliver savings of $1 billion by the end of fiscal 2025.
Full-Year Fiscal 2024 Guidance:
Given the sequential volume and margin improvement for its key brands and categories, the company is reaffirming its full-year fiscal 2024 guidance provided on August 31, 2023. Full year top-line growth rate is currently tracking to the lower end of the net sales guidance range, with possible upside should the pace of consumer recovery accelerate in the second half of the year. The company continues to expect sequential earnings and margin progress in the balance of the fiscal year reflecting a moderating inflationary environment and on-going productivity improvements.
Other additional guidance assumptions can be found in the accompanying investor presentation available at investor.campbellsoupcompany.com/events-and-presentations.
The pending acquisition of Sovos Brands is currently expected to close the week of March 11, 2024 and is not included in Campbell’s current fiscal 2024 outlook. After the transaction closes, the company expects to update guidance for the combined business with third-quarter earnings.
The full-year fiscal 2024 guidance is set forth in the table below:
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FY2023 |
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FY2024 |
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($ in millions, except per share) |
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Net Sales |
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$9,357 |
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(0.5)% to +1.5% |
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Organic Net Sales1 |
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$9,306* |
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0% to +2% |
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Adjusted EBIT2 |
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$1,367* |
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+3% to +5% |
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Adjusted EPS2 |
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$3.00* |
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+3% to +5% |
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$3.09 to $3.15 |
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* Adjusted – refer to the detailed reconciliation of the reported (GAAP) financial information to the adjusted financial information at the end of this news release. |
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1 Growth rate adjusted for the Emerald nuts business, which was divested on May 30, 2023. |
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2 Adjusted EBIT in fiscal 2023 included approximately $14 million and adjusted EPS included approximately $0.04 of litigation expenses related to the Plum baby food and snacks business (Plum), which was divested on May 3, 2021. We are excluding these expenses from our fiscal 2024 adjusted EBIT and adjusted EPS and thereafter as we do not believe that these expenses reflect our underlying operating performance. |
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Note: A non-GAAP reconciliation is not provided for fiscal 2024 guidance as the company is unable to reasonably estimate the full-year financial impact of items such as actuarial gains or losses on pension and postretirement plans because these impacts are dependent on future changes in market conditions. The inability to predict the amount and timing of these future items makes a detailed reconciliation of these forward-looking financial measures impracticable. |
Segment Operating Review
An analysis of net sales and operating earnings by reportable segment follows:
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Three Months Ended January 28, 2024 |
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($ in millions) |
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Meals & Beverages |
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Snacks |
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Total* |
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Net Sales, as Reported |
$1,382 |
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$1,074 |
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$2,456 |
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Volume/Mix |
(2)% |
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(2)% |
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(2)% |
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Net Price Realization |
—% |
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3% |
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1% |
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Organic Net Sales |
(2)% |
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1% |
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(1)% |
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Currency |
—% |
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—% |
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—% |
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Divestiture1 |
—% |
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(1)% |
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(1)% |
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% Change vs. Prior Year |
(2)% |
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—% |
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(1)% |
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Segment Operating Earnings |
$247 |
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$161 |
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% Change vs. Prior Year |
(1)% |
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7% |
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*Numbers do not add due to rounding. |
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1 Reflects the loss of net sales associated with the divestiture of the Emerald nuts business, which was completed on May 30, 2023. |
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Note: A detailed reconciliation of the reported (GAAP) net sales to organic net sales is included at the end of this news release. |
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Six Months Ended January 28, 2024 |
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($ in millions) |
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Meals & Beverages |
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Snacks |
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Total |
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Net Sales, as Reported |
$2,786 |
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$2,188 |
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$4,974 |
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Volume/Mix |
(4)% |
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(3)% |
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(3)% |
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Net Price Realization |
1% |
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4% |
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2% |
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Organic Net Sales |
(3)% |
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1% |
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(1)% |
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Currency |
—% |
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—% |
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—% |
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Divestiture1 |
—% |
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(1)% |
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(1)% |
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% Change vs. Prior Year |
(3)% |
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—% |
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(2)% |
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Segment Operating Earnings |
$534 |
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$322 |
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% Change vs. Prior Year |
(8)% |
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6% |
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1 Reflects the loss of net sales associated with the divestiture of the Emerald nuts business, which was completed on May 30, 2023. |
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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 in the quarter, both reported and organic, decreased 2% as declines in U.S. retail products, primarily declines in U.S. soup, beverages and Pace Mexican sauces, were partially offset by gains in Canada and foodservice. Net sales were impacted by unfavorable volume / mix with neutral net price realization. Following a 7% increase in the prior year, sales of U.S. soup decreased 3% primarily due to decreases in ready-to-serve soups and condensed soups, partially offset by an increase in broth. On a two-year CAGR basis, Meals & Beverages reported and organic net sales each grew approximately 4%.
Operating earnings in the quarter decreased 1% primarily due to lower gross profit, partially offset by lower marketing and selling expenses. Gross profit margin decreased due to higher cost inflation and other supply chain costs, partially offset by supply chain productivity improvements, the benefit from cost savings initiatives, favorable net price realization and favorable volume / mix.
Snacks
Net sales in the quarter were flat. Excluding the impact from the divestiture of the Emerald nuts business, organic net sales increased 1% driven by sales of its 8 power brands, which were up 4%, partially offset by declines in third-party partner brands. Sales growth was driven by increases in cookies and crackers, primarily Goldfish crackers and Lance sandwich crackers, and in salty snacks. Within salty snacks, increases primarily in Kettle Brand and Cape Cod potato chips more than offset declines in Pop Secret popcorn and Late July snacks. Sales benefited from net price realization of 3%, partially offset by unfavorable volume / mix of 2%. On a two-year CAGR basis, Snacks net sales, both reported and organic, grew approximately 7% and 8%, respectively.
Operating earnings in the quarter increased 7% primarily due to higher gross profit, partially offset by planned higher marketing and selling expenses. Gross profit margin increased due to favorable net price realization, supply chain productivity improvements, the benefit from cost savings initiatives and favorable volume / mix more than offsetting higher cost inflation and other supply chain costs.
Corporate
Corporate expenses were $89 million in the second quarter of fiscal 2024 compared to $40 million in the prior year.
Corporate expense in the current quarter included the following:
- $34 million of costs related to cost savings initiatives;
- $10 million of costs associated with the pending acquisition of Sovos Brands;
- $7 million of accelerated amortization;
- $1 million of Plum litigation expenses; and
- $7 million of unrealized mark-to-market gains on outstanding undesignated commodity hedges.
Corporate expense in the second quarter of fiscal 2023 included:
- $5 million of costs related to cost savings initiatives;
- $4 million of unrealized mark-to-market losses on outstanding undesignated commodity hedges; and
- $6 million of pension actuarial gains.
After factoring in these items, the remaining increase in Corporate expense was primarily changes in pension and postretirement benefit income.
Conference Call and Webcast
Campbell will host a conference call to discuss these results today at 8:00 a.m. Eastern Time. Participants calling from the U.S. may dial in using the toll-free phone number (888) 596-4144. Participants calling from outside the U.S. may dial in using phone number +1 (647) 495-7514. The conference access code is 2518868. In addition to dial-in, access to a live listen-only audio webcast and accompanying slide presentation, as well as a replay of the webcast, will be available at investor.campbellsoupcompany.com/events-and-presentations.
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, 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. The segment included the results of our Emerald nuts business, which was sold on May 30, 2023.
About Campbell
For more than 150 years, Campbell (NYSE:CPB) has been connecting people through food they love. Generations of consumers have trusted us to provide delicious and affordable food and beverages. Headquartered in Camden, N.J. since 1869, the company generated fiscal 2023 net sales of $9.4 billion. Our portfolio includes iconic brands such as Campbell’s, Cape Cod, Goldfish, Kettle Brand, Lance, Late July, Milano, Pace, Pacific Foods, Pepperidge Farm, Prego, 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.
