Campbell Soup Co. Faces Challenging Third Quarter | 2021-06-10

Campbell Soup Co. Faces Challenging Third Quarter |  2021-06-10

Meals & Beverages business unit sales fell 14% during the quarter to $1.04 billion. Segment operating earnings fell 35%. The decrease was primarily due to sales volume declines and lower gross margin performance partially offset by lower marketing and selling expenses, according to the company. Quarterly sales fell to $1.98 billion from $2.24 billion the year prior and reflected a difficult comparison to the third quarter of fiscal 2020 when there was the surge in at-home consumption. “Sales of US soup decreased 21% due to volume declines in condensed soups, ready-to-serve soups and broth, lapping a 35% increase in the prior year quarter,” said Mick J. Beekhuizen, chief financial officer.

“… I think that put some added pressure on an already tough quarter for us as it related to Snacks,” Mr. Clouse said. He called the third bucket “execution related” and said it was due to the transformation underway in Campbell’s Snacks business unit. Initiatives included the adoption of SAP, the closing of a plant in Columbus, Ga., and three capacity expansion projects at other facilities.

Net income for the quarter ended May 2 was $160 million, equal to 53¢ per share on the common stock, and a slight decline when compared to the third quarter of fiscal 2019 when the company earned $168 million, or 56¢ per share. “We, like others, faced pronounced inflation related primarily to steeply higher transportation costs, some of which was an outcome from the strain of the Texas winter storms on supply chain logistics and the closure of our Paris, Texas, facility for two weeks,” Mr. Clouse said. “The second bucket I would characterize as transitional items that we are working our way through as we move out of the COVID-19 environment and fully recover on supply. This includes areas like lower fixed cost leverage as we lapped the year ago elevated levels of demand, sustained labor challenges and added investment in higher-cost co-manufacturers to recover fully on supply.”

Source Adjusted earnings per share are expected to be between $2.90 to $2.93 for the year, down from $3.03 to $3.11 the year prior.

Based on third-quarter results and expected continued margin pressure in the fourth quarter related to the transition out of the COVID-19 business environment and commodity inflation, the company adjusted its fiscal 2021 guidance. Management is now forecasting fiscal 2021 sales to fall in a range between $8.38 billion and $8.43 billion. Fiscal 2020 sales were $8.69 billion. Snacks sales fell 8% to $945 million during the quarter. The business unit’s earnings fell 29%. Brands impacted by volume declines included Pop Secret, Cape Cod, Snyder’s of Hanover and Lance.

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