CAMDEN, N.J. — Weaker demand for soups, cookies and shelf-stable juices, a stronger U.S. dollar and one fewer selling week contributed to a decline in sales for Campbell Soup Co. for the fiscal year. However, executives expect strategic actions taken during fiscal 2015 will position the company for growth in the year ahead.
For the year ended Aug. 2, Campbell had net earnings of $691 million, equal to $2.21 on the common stock, down 14% from $807 million, or $2.35 per share, for the previous year. During the year, the company incurred restructuring charges and implementation costs associated with a new organization structure and cost reduction efforts.
Net sales were $8,082 million, down 2.2% from $8,268 million. The decline reflected the negative impact of foreign currency translation and one fewer selling week compared to the previous year. Campbell posted organic sales growth of 1%, driven by gains in four of the company’s five segments.
|Denise Morrison, president and c.e.o. of Campbell|
“Fiscal 2015 was an eventful year, and we took important steps to lay the foundation for the future,” said Denise Morrison, president and chief executive officer, during a Sept. 3 earnings call with financial analysts. “We redesigned our enterprise structure and our three new divisions are now operating in line with their declared portfolio roles.
“We established our integrated global services organization and moved elements of finance, procurement, marketing, sales, H.R., and I.T. into this shared service group. It’s early days, but we’re off to a solid start.
“The focus in fiscal 2016 will be working smarter, creating efficiencies, and reducing cost while starting to build new enterprise capabilities within this group.”
During the year, the company also initiated plans for a zero-based budgeting process and is working toward realizing its cost savings target of $250 million, Ms. Morrison said.
“We delivered earlier-than-expected savings of approximately $85 million across several categories, including headcount reductions, non-working marketing, reduced travel expenses and spending on consultants,” she said.
In June, Campbell expanded its footprint in fresh packaged foods with the acquisition of Garden Fresh Gourmet, a maker of refrigerated salsa, for $231 million. Additionally, Campbell announced plans to eliminate artificial colors and flavors from all of its products sold in North America.
For the fiscal year, the U.S. Simple Meals segment posted earnings of $677 million, down 5% from the year before, with sales of $2,930 million, which were flat from the prior year.
“Looking at the year within U.S. Simple Meals, the performance of our sauce business was a standout, notably Prego and Campbell dinner sauces,” Ms. Morrison noted. “Prego had another strong year behind the success of our white sauces and overall product superiority. Sales of Campbell dinner sauces increased double digits for the year.”
For the Global Baking and Snacking segment, operating earnings increased 5% to $350 million for the year, and sales declined 3% to $2,375 million.
“I feel particularly good about the improvement in Australian biscuits as the team made significant progress in this important core business,” Ms. Morrison said. “In Southeast Asia, our Indonesia business delivered another year of double-digit growth, but sales declined in the fourth quarter as a result of worsening economic conditions in this market, which we expect to persist.”
Full-year operating earnings for the International Simple Meals and Beverages segment fell 25% to $80 million, and sales declined 10% to $700 million.
The U.S. Beverages segment saw operating earnings drop 11% to $113 million for the year and sales fall 5% to $689 million.
“While the category remains challenged, the underlining trends of our business are beginning to show signs of improvement,” Ms. Morrison said. “Consumer takeaway and share increased in the fourth quarter. Modest sales declines in V8 red juice were more than offset by the introduction of V8 Veggie Blends. Trial and repeat of Veggie Blends continued to meet expectations, and depth of repeat remains strong.”
Ms. Morrison said the shelf-stable juice category will remain under “significant pressure” in the coming year.
“While we expect our U.S. beverage businesses to improve, we’re not planning on a return to growth,” she said.
The Bolthouse and Foodservice segment reported full-year earnings of $107 million, down 9% from the previous year, and sales of $8,082 million, which declined 2% from the year before.
“We continue to be enthusiastic about Bolthouse Farms, especially the branded C.P.G. business,” Ms. Morrison said. “For the year, C.P.G. sales increased high single digits. Gains were driven by product innovation, increased distribution for beverages and incremental shelf space at existing customers for our salad dressings.
“The initial roll-out of our cold-pressed organic ultra-premium beverage line 1915 by Bolthouse Farms is off to a good start.”
Consolidated net earnings for the fourth quarter were $68 million, or 22c per share, down 50% from $135 million, or 44c per share, for the comparable period. Net sales declined 9% to $1,693 million from net sales of $1,852 million for the year-ago quarter. Organic sales increased 1% from higher selling prices and lower promotional spending, which was partially offset by lower volume.
Plans for the future
Looking ahead to the coming year, Ms. Morrison said the company plans to focus on driving growth, aggressively reducing costs and reinvesting a portion of the savings in areas of the business with the greatest growth potential. Campbell expects sales will be flat to 1% higher over sales in fiscal 2015, adjusted EBIT to grow 3% to 5% and adjusted earnings per share to increase 3% to 5%. The guidance includes the impact of foreign currency translation, as well as the impact of the Garden Fresh Gourmet acquisition.
“I’m cautious but optimistic about fiscal 2016,” Ms. Morrison said. “I believe that the strategic imperatives we’re pursuing, purpose and transparency in our core business, digital marketing and e-commerce, health and wellbeing and expansion in developing markets, coupled with our divisions’ clear portfolio roles, position us well for the year ahead.“We’re very clear about our challenges, particularly driving sustainable sales growth, but we're now better organized and better prepared to meet those challenges head on.”