Campbell's 2015 sales, earnings fall as company bites down on restructuring bullet
Earnings for the year were down 2% measured on an EBIT basis, while organic sales grew 1%, the company announced. The company continues to look for cost savings, which is part of a three year plan announced in February.
Layoffs to continue
“We're off to a very good start to realizing our $250 million cost savings target. We delivered earlier than expected savings of approximately $85 million across several categories, including headcount reductions, non-working marketing, reduced travel expenses and spending on consultants,” said CEO Denise Morrison in an earnings call with analysts
While the company has not announced specific layoff targets, they are significant, judging by the dollar amounts specified. In fiscal 2015 the company recorded $102 million in costs relating to headcount reductions, principally in the form of severance packages. The company expects the program to cost an additional $100 million in fiscal 2016.
Ramping up transparency
Transparency is an industry trend that has touched Campbell along with other major brands. Ingredient sourcing used to be considered something of a trade secret, but Campbell has discovered as have other brands that consumers are starting to demand this information.
“We initiated an important project to increase consumer trust by providing greater access to information about the ingredients we use and how we make our food. This is accelerating, meaningful changes to our recipes. For instance, overtime we're planning to eliminate artificial colors and flavors from nearly all of our North American products,” Morrison said in the call which was posted in transcript form on the site seekingalpha.com.
Campbell has struggled to revamp its aging portfolio to match changing customer demographics and a market that is placing increasing emphasis on fresh, whole ingredients. The company previously purchased Bolthouse Farms, a vertically-integrated producer of carrot juice and other juice products and Campbell is continuing that sort of diversification.
“I was particularly pleased with the fourth quarter organic sales and earnings performance in U.S. Simple Meals as well as organic sales growth in Bolthouse . . . In the quarter we also completed the acquisition of Garden Fresh Gourmet, another growth engine to bolster our Campbell Fresh portfolio and extend our presence in the perimeter beyond produce into the deli section,” Morrison said.
For the year the company recorded sales of $8.1 billion, an 2% drop over the previous year. Adjusted EBIT decreased 2 percent to $1.219 billion, reflecting an adjusted gross margin percentage decline of 0.7 points, the unfavorable impact of currency translation and higher incentive compensation expense, partly offset by volume gains and lower marketing expenses. Sales in the fourth quarter showed a much sharper drop, but the company attributed some of the that to the quarter being a week shorter than the comparable period in fiscal 2014.
As far as the outlook for the future is concerned, the company said it expect sales to be flat or to grow by up to 1%. Adjusted EBIT is expected to grow by 3% to 5% and adjusted EPS to grow by 3% to 5%, or $2.53 to $2.58 per share. The company said its guidance includes the impact of currency translation, which is estimated to have a 2 percentage point negative impact, and includes the costs related to the as well as the impact of the Garden Fresh Gourmet acquisition.