By Jamie Barrie
Campbell Soup recently reported a decline in quarterly organic revenue growth and the stock shares fell 6.5% in response to the announced results.
It is clear that the company needs a change in direction, as consumers are not buying pre- packaged foods in the volumes they once did which is putting a lid on revenues. However, Campbell’s management team recognizes this change is customer behaviour and is in the midst of making drastic product changes to regain lost market share.
Campbell Soup reported second-quarter fiscal 2017 earnings of $0.91 a share, $0.03 better than the consensus estimate. However, revenue fell 1.4% to $2.17 billion, slightly below the analysts estimate of $2.22 billion.
Campbell missed on just about every metric it set. Simple Meals and Beverages were hurt by weak performance in its V8 beverage. Adding to this was that Campbell Fresh sales were hurt by higher than expected produce prices and capacity constraints. Operating income was $417 million, or 19.2% of revenue, down 1.4% compared to last year.
There was good news for the company as its expense reduction plan is ahead of schedule and Campbells will likely achieve its target of $300 million in savings by the end of fiscal 2017 and it believes it can save an additional $150 million by 2020.
Campbell’s has a corporate strategy to regain growth of its brand and has been on an acquisition spree, acquiring brands that sell healthier foods. For example, Campbell acquired Bolthouse Farms and Plum Organics in 2012 and 2013, respectively.
Most recently, they acquired Garden Fresh Gourmet to expand its “fresh through innovation” platform by adding protein juices, salsa and hummus. Next year the company plans to add fresh soups, milk products and fancy smoothies to take another kick at the can to try and push the company earnings to $3.00-$3.09 a share and revenue to over $8.0 billion.