CAMDEN, NJ, November 15, 2000—Campbell Soup Company (NYSE: CPB) today reported diluted earnings per share of $.47 for the first quarter ended October 29, 2000, versus $.54 in the same period last year. Net sales in the quarter increased 1 percent to $1.8 billion, a 4 percent increase before the impact of divestitures and currency. Net earnings declined 13 percent to $204 million compared to $235 million a year earlier. This earnings performance was largely driven by the company’s decision to significantly increase marketing spending on its U.S. soup business and Pepperidge Farm.
David W. Johnson, President and Chief Executive Officer, commented, “Campbell’s sales comeback is being driven by soup. First quarter global soup volume is up 4 percent. In the U.S., where our share of the wet soup market is over 70 percent, consumption is up 3 percent. This reflects an increased advertising investment on U.S. soup of 14 percent. Our commitment is to win first and foremost with the consumer.”
The company also reported:
- Most of its portfolio showed strong sales growth, including Pepperidge Farm, Godiva, Arnott’s in Australia and its soup businesses in France, Germany and Australia.
- Gross margin improved to 54.6 percent from 54.2 percent as favorable product mix and continued cost productivity programs more than offset the impact of inflation on manufacturing costs.
- For the quarter, the company reported free cash flow of $235 million.
- As previously announced, as a result of the significant increase in marketing investment, primarily in the first half of fiscal 2001, the company expects earnings per share for the year to be essentially flat compared with last year.
A summary of fiscal 2001 first quarter results follows:
Soup and Sauces
Sales for the quarter were $1.3 billion, an increase of 1 percent, up 2 percent before the impact of currency. Operating earnings declined 9 percent, 8 percent before currency, to $326 million, resulting from increased marketing investments.
A 4 percent increase in U.S. soup shipments contributed to the worldwide wet soup shipment increase of 4 percent for the quarter. The U.S. soup gains were led by “Chunky,” “Swanson” broths and new “Campbell’s” Ready to Serve soups with easy-open tops. In addition, Campbell’s top selling condensed soups–chicken noodle and tomato–delivered strong sales growth and are supported by the new “M’m! M’m! Good!” advertising campaign.
Outside the U.S., wet soup volume increased 4 percent. Erasco in Germany reported strong sales behind the introduction of a new line of soups in pouches and Liebig in France began the new fiscal year with strong momentum in bottled soup. In Australia, the introduction of “Velish,” a new line of premium soups in aseptic cartons, contributed to strong sales growth.
Beyond soup, “ Prego” pasta sauces reported volume gains in a highly competitive category with increases in both consumption and share. In the U.K., “Homepride” introduced new “Pasta Stir & Serve” sauces to complement its successful launch of “Pasta Bakes” in the previous fiscal year. Total beverage sales decreased from the same quarter a year ago primarily driven by volume declines in “V8 Splash.”
Biscuits and Confectionery
Sales for the quarter increased 4 percent to $390 million, up 9 percent before the impact of currency, with strong sales across all segments. Operating earnings were down 18 percent, 13 percent before currency, to $48 million reflecting heavy marketing investments in Pepperidge Farm, Arnott’s and Godiva Chocolatier.
Pepperidge Farm reported increased sales driven by strong consumption growth in crackers, cookies and frozen. Pepperidge Farm’s strong sales performance was led by its core “Goldfish” brand, including new “Giant Goldfish” and “Goldfish Grahams.” Other biscuit lines performed well, including the new “Spritzers” cookie, which was recently launched.
Godiva Chocolatier delivered another outstanding performance with double-digit sales growth in all geographic regions and channels, driven by new store openings and increased sales in stores open more than one year.
Arnott’s in Australia reported strong sales growth for the quarter in its core biscuit business. New varieties of top-selling “Tim Tam” biscuits and “Shapes” crackers helped drive positive consumption trends. Earnings were down as a result of increased investments.
Away From Home
Away From Home reported sales in the quarter of $135 million, unchanged from a year ago. Operating earnings were $16 million, an 8 percent increase over the prior year, which included start-up costs associated with the new Stockpot plant. The division continues to focus on driving its “Campbell’s” branded soup business through its kettle program in high volume venues such as colleges and hospitals and through alliances with quick-serve restaurants and soup distributors.
The company also announced that it will purchase 11 million shares of its common stock under existing forward purchase contracts at a cost of approximately $521 million and concurrently will suspend its 2 percent annual share repurchase program. Under these contracts, which were entered into between October 1998 and April 1999, the company committed to purchase shares at a fixed price to partially offset the company’s equity exposure from its stock option program. Campbell will continue to purchase shares on the open market to offset the impact of share dilution from its incentive compensation programs. This action is not expected to have an impact on diluted earnings per share in fiscal 2001 because higher interest expense will be offset by fewer diluted shares outstanding.
If the company did not purchase the contracted shares at this time it would be subject to future earnings volatility as a result of mandatory new accounting rules that must be adopted later this fiscal year. Under those rules, the company would be required to mark these shares to market on a quarterly basis over the life of the contracts.
This release contains “forward-looking statements” which reflect the company’s current expectations about its future performance. These forward-looking statements rely on a number of assumptions and estimates which could be inaccurate and which are subject to risks and uncertainties. Actual results could vary materially from those anticipated or expressed in any forward-looking statement made by the company. Please refer to the company’s most recent Form 10-K and subsequent filings for a further discussion of these risks and uncertainties. The company disclaims any obligation or intent to update the forward-looking statements in order to reflect events or circumstances after the date of this release.
About Campbell Soup Company
Campbell Soup Company is the world’s largest maker and marketer of soup. The company’s soups are sold under the global “Campbell’s” brand, as well as “Erasco” in Germany and “Liebig” in France. Among its other strong food brands are “Pepperidge Farm” cookies and crackers, “V8” and “V8 Splash” juices, “Pace” Mexican sauces, “Prego” pasta sauces, “Swanson” broths, “Homepride” sauces in the United Kingdom, “Arnott’s” biscuits in Australia, and “Godiva” chocolates around the world. For more information on the company, visit Campbell’s web site on the Internet at www.campbellsoup.com.