Campbell Soup (CPB, Financial) released the financial results for its third quarter of fiscal 2021 on June 9 before the market opened. While earnings fell short of Wall Street’s estimates, revenue matched projections.
The company’s shares dropped 7.8% in premarket trading to $45.30 following the earnings announcement.
Snapshot of the quarter
The American processed food and snack company posted adjusted earnings per share of $0.57 (down 31% year-over-year), which was lower than analyst estimates of 66 cents. Revenue of $1.98 billion was down 11.6% on a year-over-year basis but matched projections.
The gross margin decreased to 31.7%. This was largely driven by unfavourable product mix coupled with reduced operating leverage. Supply chain and cost saving measures only partly negated the decline.
President and CEO Mark Clouse commented the following on the company's performance:
“Our results were impacted by a rising inflationary environment, short-term increases in supply chain costs, and some executional pressures as we continued to advance our transformation agenda, primarily in our 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.”
Segment performance
In the Meals and Beverages segment, net sales plunged 14% compared to the prior-year quarter. The company suffered from weak U.S. retail business and declines in Canada and foodservice. Within the segment, U.S. soup saw sales decrease 21%, driven primarily by volume declines in condensed soups, ready-to-serve soups and broth. Likewise, operating profit in the segment plummeted 35%, negatively impacted by sales volume declines and lower gross margin performance.
Sales in the snacks segment tumbled 8%. The decline was attributable to lower sales of fresh bakery products, Pepperidge Farm cookies, Kettle Brand and Cape Cod potato chips and Snack Factory Pretzel Crisps. Goldfish crackers witnessed flat sales during the quarter. The segment's operating profit dipped 29%. The decline was primarily due to higher selling costs and lower sales volume, partially negated by supply chain productivity gains.
Financials and dividend
At the end of first quarter, the company had cash and cash equivalents of $209 million and long-term debt of $5 billion.
The company earned $881 million in net cash from operating activities during the fiscal three fiscal quarters. During the same period, the company paid total cash dividends of $327 million.
Financial forecast
Campbell has provided guidance for full-year fiscal 2021. The company foresees its sales to decline in the 3% to 3.5% range. This excludes the impact of the divested European chips business. Adjusted EPS is predicted to fall within the range of $2.90 to $2.93. That compares with its previous forecast of $3.03 to $3.11 per share.
