Fourth quarter fiscal 2015 recap
Campbell Soup’s (CPB) fiscal 4Q15 results were affected by a fall in sales volume and weaker profit margins. All the comparisons in this article are to fiscal 4Q14. Sales fell by 9% to $1.7 billion in fiscal 4Q15. However, there was a 1% rise in organic sales. The company saw a rise in its gross margin of 1.8 percentage points to 36.1%. Campbell also recorded an adjusted EBIT (earnings before income and tax) rise of 5% to $234 million.
As per the company, its fiscal fourth quarter results were also affected from one fewer week in fiscal 2015 compared to fiscal 2014. Sales for fiscal 4Q15 were negatively affected by ~7 points, and sales for fiscal 2015 were negatively affected by ~2 points. There was an estimated impact of $0.08 per share on the company’s earnings per share as well.
For the full fiscal 2015, sales fell 2% to $8.1 billion compared to fiscal 2014. Out of the company’s five reportable segments, four segments contributed to the 1% rise in organic sales with gains in fiscal 2015. Adjusted EBIT for fiscal 2015 fell 2% to $1.2 billion. The average analyst estimates for revenue for the upcoming fiscal 1Q16 equal $2.2 billion.
Factors responsible for the performance
The negative impact of currency translation affected the overseas sales. Higher selling prices and lower promotional spending contributed to the rise in organic sales. Productivity improvements, higher selling prices, and lower promotional spending, partly offset by input cost inflation, lent a hand to the rise in gross margin. The full fiscal year’s results were impacted by the adverse effects of currency translation. However, higher selling prices and a rise in volume compensated for the fall in full-year sales. An unfavorable effect of currency and higher incentive compensation expense lead to lower EBIT.
As the company mentioned in its press release, it incurred restructuring charges and implementation costs relating to its cost savings initiatives and new organizational structure. These initiatives had an aggregate after-tax impact of $0.21 and $0.25 on the fourth quarter and fiscal 2015 EPS, respectively.
Campbell Soup’s competitors General Mills (GIS), Pinnacle Foods (PF), and Flowers Foods (FLO) recorded net margins of 10.1%, 7.6%, and 5.8%, respectively, in their last reported quarters. The Vanguard Consumer Staples ETF (VDC) and the Fidelity MSCI Consumer Staples Index ETF (FSTA) invest 0.53% and 0.49%, respectively, of their portfolios in CPB.
Note: We have updated this post with further background on Campbell’s 4Q15 and fiscal 2015 performance.