Campbell Soup (CPB 46.01, -3.92) sports a pre-market loss of 7.9% in response to disappointing results and lowered earnings guidance.
The food processing company reported below-consensus first quarter earnings of $0.92 per share on a 1.9% year-over-year decline in revenue to $2.16 billion, which was also a bit shy of expectations.
In addition to missing expectations, Campbell Soup lowered its outlook for the fiscal year, expecting below-consensus earnings between $2.95 and $3.02 per share, down from previous guidance for earnings between $3.04 and $3.11 per share. Revenue is expected to decline as much as 2.0%, coming in between $7.73 billion and $7.89 billion, which is on the light side of market expectations.
The company's earnings guidance cut was owed in part to a disappointing gross margin performance in the first quarter, as gross margin declined to 36.5% from 38.7% one year ago. Cost inflation and higher supply chain costs and an unfavorable mix were partly offset by improved productivity and benefits from cost savings initiatives.
First quarter sales were reduced by a 2.0% drop in organic sales due to lower volume. Looking at the segment breakdown, Americas Simple Meals and Beverages sales declined 5.0% to $1.22 billion. Lower sales of soup and V8 beverages were partly offset by gains in Prego pasta sauces. U.S. soup sales fell 9.0% with condensed soups, broth, and ready-to-serve soups driving the decline. Inability to reach an agreement with a key customer on a promotional approach for soup in fiscal 2018 weighed on results. Segment operating earnings fell 14.0% to $328 million due to lower sales volume and lower gross margin percentage.
Global Biscuits and Snacks sales increased 3.0% to $709 million, partly due to currency translations. Excluding currency translations, segment sales grew 2.0% thanks to gains in Pepperidge Farm snacks. Segment operating earnings grew 4.0% to $120 million thanks to higher sales volume.
Campbell Fresh sales were little changed at $234 million. Gains in carrot ingredients, Garden Fresh Gourmet, and Bolthouse Farms salad dressings were offset by declines in carrots. The segment recorded an operating loss of $6 million after reporting earnings of $1 million one year ago. Higher carrot costs weighed on operating earnings.