Campbell Soup 4Q13 Earnings Call Notes

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A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

A tough environment

“We are in the midst of a turbulent period. Retailers are wrestling with challenged consumers who remain under pressure and consumer behavior is becoming less predictable. We believe the weakness that Campbell and other food companies experienced in January was partially related to the extreme weather conditions which dealt a blow to the U.S. economy.”

5% Revenue growth, 2-4% EPS growth

“Campbell reiterated our annual guidance this morning. We expect continuing operations to grow sales by 4% to 5%, adjusted EBIT by 4% to 6% and adjusted EPS by 2% to 4%.”

Weather has pluses and minuses

“We have assessed that weather is neutral to us in this quarter. We definitely acknowledge a benefit of cold temperatures, but we think it was offset by unfavorable weather disruptions. We had plant closures for a while, retail store closures and some lost business in the Foodservice sector.”

Working with Green Mountain in soups, but not in cold beverages

“We continue to work with Green Mountain on the development of the new Fresh-Brewed Soup K-Cup product and we do not have plans at this point for V8 or Bolthouse Farms execution.”

Weather impacting gross margin

“Gross margin has been negatively impacted in the first quarter. Well, actually really in the first-half, but particularly in the second quarter. In the first quarter, we had the Plum recall and in the half, we have had some project expense work that’s fallen into cost of sales, maybe a little bit higher than what we originally anticipated. We have had some weather related costs. The weather has been so severe, we actually had soup freeze in some of our transportation and have to be destroyed and that sort of thing. So we have had some kind of one-off impacts in cost of sales in the first-half.”

Different moving pieces in commodities markets

“As we look forward to next year, you are right. The drought in California is probably going to have an impact on our tomato and our processed tomato cost structure. Obviously you are right about grains, a little bit relief for Pepperidge going forward. But not much impact in the second-half. As you know, we have got a commodity buying program that keeps us out a little bit ahead of the curve and we are pretty well locked in for the balance of this year.”