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Campbell’s Beats Fiscal Q2 Sales Expectations, Challenges Persist

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Sales versus estimates

The Campbell Soup Company (CPB) reported sales of $2.2 billion in fiscal 2Q18, surpassing analysts’ estimates and rising marginally on a YoY (year-over-year) basis. Incremental sales from CPB’s Pacific Foods acquisition and favorable currency rates supported the company’s top line growth rate.

However, a continued fall in the sales of soups and V8 beverages remained a drag. Organic sales fell 2% on a YoY basis, reflecting lower volumes.

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Sales by segment

Campbell’s net sales in the Americas Simple Meals and Beverages segment fell 2%, reflecting continued falls in soup and V8 beverage sales partially offset by benefits from the acquisition of Pacific Foods. Organic sales fell 4%, reflecting lower volumes offset in part by an improvement in retail business in Canada. Within the segment, US soup sales fell 7%, reflecting a dispute with a key customer. By product category, ready-to-serve and condensed soups marked a fall during the quarter. V8 beverages also remained challenged as consumers shifted toward healthy beverages.

Sales in the Campbell Fresh segment fell 1% in fiscal 2Q18, reflecting falls in the sales of Bolthouse Farms refrigerated beverages. The antisugar drive and the consumer shift toward healthy beverages took a toll on the segment’s performance.

The Global Biscuits and Snacks segment continued to perform well and recorded a 4% improvement in its top line driven by continued growth in Pepperidge Farm sales and improvements in Kelsen in China. Pepperidge Farm’s top line grew on the back of increased sales of crackers and cookies. Meanwhile, Kelsen’s top line benefited from expanded distribution, and the Chinese New Year drove demand.

Outlook revised

The company now expects its top line to either fall 1% or rise 1% in fiscal 2018. Earlier, its sales were expected to remain flat or mark a YoY fall of 2%. This revised guidance reflects the 1% benefit from the Pacific Foods acquisition. New product launches and continued growth in the Snacks segment are expected to drive the company’s top line. However, weak soup sales and challenges in V8 beverages are likely to remain a drag.

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