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Campbell Soup executives point to progress as vote on board nears

November 23, 2018
Consumer Packaged Goods

Executives of the Campbell Soup Co. gave updates on efforts to stabilize its U.S. soup business, sell non-core businesses and select a new chief executive officer when giving first-quarter results on Nov. 20, nine days before an annual shareholders meeting that will see a contentious vote for the board of directors.

Third Point, a New York-based investment firm that owns about 6% of Campbell Soup Co.’s stock, has nominated 12 people to replace the current board of directors.

Campbell Soup Co. in the quarter ended Oct. 28 reported net earnings of $194 million, or 64c per share on the common stock, which was down 29% from $275 million, or 91c per share, in the previous year’s first quarter. Net sales in the quarter increased 25% to $2,694 million from $2,161 million due to a 29-point benefit from the acquisitions of Snyder’s-Lance, Inc. and Pacific Foods of Oregon. Organic sales declined 3%, primarily because of higher promotional spending.

The company’s stock on the New York Stock Exchange closed at $40.55 per share on Nov. 20, up more than 5% from a close of $38.45 on Nov. 19.

“We are in a turnaround, and we’re executing against the plan we laid out on Aug. 30,” said Keith R. McLoughlin, interim president and c.e.o., in a Nov. 20 earnings call. “We’re pleased to have the first-quarter results give us the ability to reaffirm guidance for the full year. We’re getting traction. We’re seeing early signs of progress for the turnaround, but there is still a ton of work in front of us.”

The work includes U.S. soup, which is part of Campbell’s Meals and Beverages segment. First-quarter earnings within the segment fell 11% to $294 million, primarily because of a lower gross margin percentage offset partly by lower advertising expenses. Segment sales of $1,244 million were up 0.4% from $1,239 million in the previous year’s first quarter. Organic sales decreased 5%, primarily because of declines in U.S. soup, Prego pasta sauces and Canada. Excluding the benefit of the Pacific Foods acquisition and an impact from a change in revenue recognition, U.S. soup sales declined 5%.

“Stabilizing soup is our top priority given the importance of this business,” Mr. McLoughlin said. “We’re executing the plans we outlined back in August with increased emphasis on price realization, optimized merchandising support, targeted consumer-driven innovation and (being) more effective in contemporary marketing focused on the iconic Campbell’s master brand. We are doing the right things and are encouraged that our plans are beginning to have an impact.”

Category momentum, expanded distribution and a new marketing campaign that began in October drove Swanson sales and share growth. Campbell in the first quarter launched Well Yes! sipping soups for on-the-go snacking.

“It’s early days, but the launch has gained strong distribution, and early velocity is ahead of our expectations,” Mr. McLoughlin said.

Soup advertising began in the last two weeks of October compared to September in 2017. Start-up issues with a new distribution facility in Findlay, Ohio, were given as the reason for the later advertising start. The facility, operated by a third-party logistics provider, serves as the Midwest hub for distributing most of Campbell’s meals and beverage products, said Anthony P. DiSilvestro, senior vice-president and chief financial officer for Campbell Soup Co. Incremental costs were $12 million.

Campbell Fresh productsWhile focusing on growing its soup business, Campbell Soup Co. plans to sell its International and Fresh businesses.

“We continue to expect to announce buyers for these businesses before the end of the fiscal 2019, but our overrunning goal remains to run a highly disciplined process on a timeline that will achieve the maximum value for these attractive assets,” Mr. McLoughlin said.

The Campbell Fresh segment in the quarter had an operating loss of $3 million, which compared to an operating loss of $6 million in the previous year’s first quarter. Sales of $232 million were down 1%.

The Global Biscuits and Snacks segment had operating earnings of $154 million, up 32% from the previous year’s first quarter. Sales of $1,218 million were up 77%. Excluding the benefit of the Snyder’s-Lance acquisition and the impact of currency translation, sales in Global Biscuits and Snacks were down 1%.

Campbell Soup Co. still expects to name a new c.e.o. by the end of the year, said Mr. McLoughlin, who took over as interim c.e.o. when Denise C. Morrison retired in May. Mr. McLoughlin has said he is not interested in becoming c.e.o. permanently.

“This is a very attractive role to a number of highly qualified internal and external candidates,” he said. “The board continues to have extensive discussions with a number of candidates who possess deep experience in consumer packaged goods and a strong track record of proven results.”

By Jeff Gelski

Source: Food Business News

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