Campbell Soup (CPB 46.70, -3.55) has slid 7.1% in pre-market after missing quarterly expectations and issuing cautious guidance.
The consumer staples heavyweight reported below-consensus fourth quarter earnings of $0.52 per share on a 1.4% year-over-year decline in revenue to $1.66 billion, which was also shy of estimates.
Commenting on the quarter, Campbell's management noted that shifting demographics and changing consumer preferences for packaged food have made it difficult for the company to satisfy customers with its established offerings.
Adjusted gross margin improved 80 basis points year-over-year to 36.9% due to productivity improvements and benefits from cost saving initiatives. The benefits were partially offset by cost inflation and higher supply chain costs.
Organic sales declined 1.0% due to lower volume.
Looking at the segment breakdown, Americas Simple Meals and Beverages sales declined 3.0% to $815 million due to lower sales of soup and V8 beverages. U.S. soup sales fell 4.0% due to declines in condensed soup, broth, and ready-to-serve soups. Retailers reduced their inventory levels, but consumer takeaway in measured channels remained little changed year-over-year. Sales of U.S. soup fell 1.0%. Segment operating earnings rose 4.0% to $198 million, thanks to lower advertising, consumer promotion, and administrative expenses.
Global Biscuits and Snacks sales were little changed year-over-year at $624 million. Strength in Goldfish crackers and gains in Arnott's biscuits in Australia were offset by declines in Indonesia. Segment operating earnings grew 35.0% to $109 million, thanks to a higher gross margin and lower expenses.
Campbell Fresh sales rose 1.0% yea-rover-year to $225 million, thanks to higher sales of Garden Fresh Gourmet, carrots, and carrot ingredients. Supply constraints led to a slight decline in sales of Bolthouse Farms refrigerated beverages. The segment recorded an operating loss of $8 million, down from earnings of $8 million one year ago. Higher administrative expenses, higher carrot costs, and the cost impact of enhanced quality processes led to the decline.
Campbell Soup said it expects a challenging operating environment to continue into fiscal year 2018. Earnings for fiscal year 2018 are expected between $3.04 and $3.11 per share, which is below market expectations. Revenue is expected between $7.73 billion and $7.89 billion, which is also short of market estimates.
Shares of Campbell Soup have faced a downtrend ever since hitting a record high of $67.89 in July 2016. The stock ended 2016 at $60.47 and today's decline has widened its year-to-date loss to 22.8%.