Campbell Soup(US:CPB)2023-06-07 15:05Financial Data and Key Metrics Changes - The company reported a 5% increase in net sales for the third quarter, driven by inflation-driven net price realization, despite a 7% decline in volume and mix due to the comparison with the previous year's retailer inventory rebuild [5][17][116] - Adjusted EBIT margin decreased by 110 basis points to 14%, and adjusted EPS decreased by 3% to $0.68, primarily due to lower adjusted EBIT and a higher adjusted effective tax rate [16][20][140] - Year-to-date adjusted EBIT margin remained stable at 15.4%, compared to 15.6% for the same period last year [117] Business Line Data and Key Metrics Changes - In the Meals & Beverages segment, reported net sales decreased by 2%, while organic net sales decreased by 1%, primarily due to inventory and elasticity-driven volume declines [57][130] - The Snacks business saw a 12% increase in net sales, marking the third consecutive quarter of double-digit growth, driven by power brands [21][134] - The operating margin for the Snacks segment increased by 330 basis points to 16%, with year-to-date operating margin up 150 basis points to 14.5% [34][141] Market Data and Key Metrics Changes - In-market dollar consumption for the total Snacks business grew by 15% year-over-year, with a 32% increase compared to four years ago [11] - Dollar consumption growth in measured channels outpaced net sales growth, indicating strong consumer demand despite volume declines [31] Company Strategy and Development Direction - The company aims to grow its soup business and has made significant progress in enhancing the relevance of the category, particularly among younger consumers [110][111] - The focus remains on maintaining competitive pricing and promotional strategies while ensuring brand differentiation [49][105] - The company is committed to investing in marketing and innovation to support growth in its Snacks business and overall brand equity [80][82] Management's Comments on Operating Environment and Future Outlook - Management noted that the consumer remains resilient but is feeling pressure, leading to a shift towards value-oriented products [104] - The company expects volume trends to improve as they cycle through tough comparisons from the previous year [131] - Management expressed confidence in navigating the current operating environment, emphasizing the strength of their supply chain as a competitive advantage [97][98] Other Important Information - The company reaffirmed its full-year fiscal 2023 financial guidance for net sales and adjusted EBIT, tracking towards the upper end of adjusted EPS outlook [22][109] - Capital expenditures for fiscal 2023 are expected to be $360 million, up from previous guidance of $325 million, to accelerate manufacturing capacity investments in the Snacks business [36] Q&A Session Summary Question: How does the company view the current consumer and operating backdrop? - Management characterized the consumer as resilient but noted increasing pressure, leading to a shift towards value-oriented purchases [104] Question: What is the outlook for the soup market and competitive dynamics? - Management indicated that while there is increased competition, they do not see significant negative impacts on their market position and are focused on maintaining brand equity [68][69] Question: How is the company managing pricing and promotional strategies? - The company aims to balance pricing and promotions without chasing prices down, focusing on brand differentiation to drive value [49][105] Question: What are the expectations for volume trends moving forward? - Management expects volume trends to improve as they cycle through previous year's inventory dynamics, with price elasticities remaining below historical levels [54][131]