CAMDEN, NJ. — Input costs and a labor shortage affected earnings and net sales negatively for the Campbell Soup Co. in the second quarter ended Jan. 30. Company executives expect pricing actions and hiring efforts to alleviate those concerns and bring better results in the second half of the fiscal year.
Net earnings of $212 million, or 70¢ per share on the common stock, were down 13% from $245 million, or 81¢ per share, in the previous year’s second quarter.
Net sales of $2.21 billion were down 3% from $2.28 billion in the previous year’s second quarter but up 2% from the second quarter of 2020. Organic net sales, excluding the impact from the sale of the Plum baby food and snacks business, fell 2% when compared with the previous year’s second quarter. Industrywide labor and supply challenges more than offset a favorable impact of net pricing, according to the Camden-based company.
“Q2 was challenging as we expected, including industrywide constraints on labor and materials availability made even tougher by the winter omicron surge, as well as ongoing commodity and logistics inflation,” said Mark A. Clouse, president and chief executive officer, in a March 9 earnings call. “However, more recently, labor and service levels are improving as COVID cases decline, and we see greater impact from our aggressive hiring and training.
“Since October, our full-time filled headcount increased by 10 points, and we now see absenteeism and vacancy rates trending back to normal levels. This is translating to more production and the beginning of a return to normal distribution and inventory levels.”
Pricing actions taken by Campbell Soup Co. took effect at the end of the second quarter and should have more of an impact on third-quarter results, said Mick J. Beekhuizen, chief financial officer.
Russia’s invasion of Ukraine will have no direct effect on Campbell Soup Co. since the company has no sales and no direct sourcing in either country, Clouse said.
“Of course, the question then becomes the macroeconomic impact of the conflict, and as we look at '22, we've got about 90% of our commodities covered, which leaves us about $150 million in cost that we're still navigating through,” he said.
Net sales in Campbell’s Meals and Beverages business unit slipped 3% to $1.28 billion in the quarter. Gains in foodservice partially offset declines in US retail and in Canada. Consumption was up 1% over the previous year’s second quarter and up 11% over the second quarter of 2020, Mr. Clouse said. Soup consumption increased 3% compared with 2021 and 10% compared with 2020 even though private label pressured share in condensed soup.
“We had continued success with younger buyers,” Clouse said. “We performed very well and brought in additional millennial and Gen Z buyers to both our condensed eating and cooking varieties in the second quarter.
“On total US soup, household penetration in the quarter was up versus both the prior year and two years ago, and importantly, we continue to see more consumers participating in the soup category and purchasing our soup brands compared to pre-pandemic levels.”
Consumption of the Chunky ready-to-serve soup brand increased 9% when compared with the previous year’s second quarter and 25% when compared with the second quarter of 2020, he said.
Net sales in the Snacks unit declined 3% to $934 million due to declines in non-core businesses and certain salty snacks, primarily the Late July brand. Supply constraints due to labor drove volume declines. Goldfish consumption in the quarter grew by 9%.
Companywide in the six months ended Jan. 30, net earnings of $473 million, or $1.57 per share on the common stock, were down 15% from $554 million, or $1.83 per share, in the same time of the previous year. Net sales over the six months decreased 4% to $4.45 billion from $4.62 billion.