Campbell Soup headquarters
Net income for the Campbell Soup Co. during fiscal 2017 rose to $887 million, up from $563 million in fiscal 2016.
 

CAMDEN, N.J. – The Campbell Soup Co. is facing two challenging situations. The overall food and beverage market headwinds that chief executive officer Denise Morrison has addressed numerous times continued to hinder the company during fiscal 2017, ended July 30. More alarmingly is how one customer’s unwillingness to enter a soup promotional program with the company may impact soup sales during the first half of fiscal 2018 and be a drag on the company’s overall performance during the year.

Denise Morrison, Campbell
Denise Morrison, c.e.o. of Campbell Soup

Among the headwinds Ms. Morrison cited include the changing retail landscape, with hard discounters expanding their presence in the United States, the growth of private label, e-commerce and competition from meal delivery services. To address these challenges, the company is altering its approach to collaborating with customers around merchandising, the development of shopper insights and new product development.

Net income for the Campbell Soup Co. during fiscal 2017 rose to $887 million, equal to $2.91 per share on the common stock, up from $563 million, or $1.82 per share, in fiscal 2016.

Sales for the year fell approximately 1% to $7,890 million when compared with the previous year.

Cambell Soup C-Fresh unit
 

“A highlight for fiscal 2017 was our successful multi-year cost savings initiative,” Ms. Morrison said Aug. 31 during a conference call with financial analysts. “As announced this year, we’ve increased our target by $150 million and now expect to deliver $450 million in savings by the end of fiscal 2020.”

Two business units that remain challenged during the fourth quarter and much of the year were Campbell Fresh and Americas Simple Meals and Beverages. Specifically, capacity constraints in its Campbell Fresh business impacted results.

“As I’ve said before, we’ve learned some tough lessons in C-Fresh,” Ms. Morrison said. “Despite the executional challenges, we remain confident in the growth potential of the Packaged Fresh category and believe our C-Fresh strategy is sound. Throughout fiscal 2017, we took steps to build a stronger foundation for growth under our new C-Fresh leadership team.”

Cambell Soup Americas Simple Meals & Beverages unit
 

In the Americas Simple Meals and Beverages business unit soup sales declined 4% during the quarter and 1% for the entire year. Because of the retailer promotional issue, the company has altered its guidance in the soup business for fiscal 2018.

“ … We now expect our soup sales to decline in fiscal 2018,” Ms. Morrison said. “We are taking a number of steps to mitigate the profit risk, and of course, we’re continuing discussions with this customer to create a win-win solution. We believe our fiscal 2018 soup lineup and promotional programs are strong, and we're pleased that they’ve been well received in the balance of the marketplace.”

Anthony P. DiSilvestro, chief financial officer, said he did not know if a competitive situation may be the cause of the disagreement with the retailer.

Anthony DiSilvestro, Campbell
Anthony DiSilvestro, c.f.o. of Campbell Soup

“We know what it is vis-à-vis our product, but it’s hard for us to sit here and say we know what they’re going to do with respect to the other brands within this category,” he said. “I will add that this situation with this retailer is unique to this soup category, not to the other categories in which we participate even with this retailer.”

In fiscal 2018, management said the company expects sales to change by -2% to zero and adjusted earnings per share to be in the range of $3.04 to $3.11 per share.

Campbell Soup products
During the fourth quarter, Campbell Soup’s net income totaled $318 million.
 

“Looking ahead to fiscal 2018, we expect the operating environment to remain difficult,” Ms. Morrison said. “We will continue to position Campbell for long-term growth by managing costs aggressively and re-investing a portion of those savings back in the business with a focus on our strategic imperatives of real food, digital and e-commerce, health and well-being, and snacking.”

During the fourth quarter, Campbell Soup’s net income totaled $318 million, or $1.05 per share, which compared with a loss of $81 million during the same quarter a year ago.

Sales declined slightly to $1,664 million from $1,687 million the previous year.