Campbell Soup Co. announced the departure of its chief executive officer just before reporting a hefty net loss for the third quarter, impacted by a $619 million impairment charge for the Campbell Fresh unit.
With the disappointing financial results, Campbell also said Friday that it would undertake a strategic review of its business.
President and CEO Denise Morrison has retired, effective immediately, and been replaced on an interim basis by board member Keith McLoughlin. Campbell said Luca Mignini, promoted to chief operating officer last month as part of a reorganization, will focus on the integration of recently acquired Snyder’s-Lance and Pacific Foods and stabilization of the U.S. soup business.
Morrison (left) had served as president and CEO since August 2011, when she succeeded Douglas Conant, who held that role for over a decade. In October 2010, she was appointed executive vice president and chief operating officer and elected as a director in anticipation of being named to the CEO post at the start of fiscal 2012.
“Denise has been a passionate advocate and leader over her 15 years with the company. She has made many important contributions over the past seven years as chief executive officer to reposition Campbell in the rapidly changing food industry,” Chairman Les Vinney said in a statement. “Denise has been able to significantly transform Campbell’s portfolio into the faster-growing snacking category with the acquisition of Snyder’s-Lance and increased the company’s focus on health and well-being with brands like Pacific Foods. Her actions have helped to enhance the long-term growth potential of Campbell.”
McLoughlin (left) has served as an independent director on Campbell’s board since 2016. From 2011 to February 2016, he was president and CEO of household appliances maker Electrolux AB.
“Having been a director and observing the company over an extended period of time, I know where Campbell has been and where it’s headed, and am excited to lead the company as we continue to work to increase value for all our stakeholders,” he commented on being named interim CEO. “I am eager to begin working with our talented team as we strive to accelerate our growth strategy, improve our execution and deliver shareholder value.”
In the third quarter ended April 29, Campbell posted sales of $2.13 billion, up 15% year over year, fueled largely by the addition of Snyder’s-Lance. The company said sales rose 5% for its Americas Simple Meals and Beverages division, 35% for Global Biscuits and Snacks (reflecting the Snyder’s-Lance acquisition) and 1% for Campbell Fresh.
On the earnings side, the company posted a GAAP net loss of $393 million, or $1.31 per share, and an EBIT (earnings before interest and taxes) loss of $475 million for the quarter, reflecting the $619 million impairment charge for Campbell Fresh, which had a per-share negative impact of $1.65.
Adjusted net earnings came in at $210 million, or 70 cents per share, while adjusted EBIT was $308 million. Analysts, on average, had projected adjusted EPS of 61 cents, according Thomson Reuters.
“In the third quarter, we made some progress against our key priorities. We completed the Snyder’s-Lance acquisition, substantially expanding our portfolio in the faster-growing snacking categories, and we made some progress in stabilizing sales in U.S. soup. However, we are not satisfied with our financial results,” said Anthony DiSilvestro, chief financial officer.
“Our performance has been impacted by both execution-related and external challenges. We are addressing these challenges with renewed urgency. Looking ahead, we will be reviewing all aspects of our strategic plans and portfolio composition,” he added. “We anticipate that our review, which will take several months to complete, will lead to changes designed to improve our operating performance and create long-term shareholder value.”
First-quarter sales for Campbell Fresh totaled $251 million, up 1%, stemming mainly from gains in refrigerated soup, Campbell reported. Sales of Bolthouse Farms refrigerated beverages were comparable to the prior year.
The segment’s operating loss was $19 million, compared with year-ago earnings of $1 million. Campbell said the decline came primarily from a lower gross margin percentage, reflecting higher supply chain costs and cost inflation, including higher transportation and logistics costs.
“As a result of the disappointing Campbell Fresh performance, we revised the long-term forecast for that business, and we recorded a $619 million pretax noncash impairment charge in our GAAP results,” DiSilvestro told analysts in a conference call on Friday. “We are all disappointed with the results of C-Fresh, and we acknowledge that they are unacceptable.”
Campbell Fresh includes Bolthouse Farms fresh carrots, carrot ingredients, refrigerated beverages and refrigerated salad dressings; Garden Fresh Gourmet salsa, hummus, dips and tortilla chips; and the U.S. refrigerated soup business.
“As interim CEO, my mandate from the board is clear: one, to lead the company, along with the Campbell's leadership team, until the board appoints the new chief; and two, to get the performance back on track for the company by conducting a thorough review of our strategic and operating plans, the composition of our entire portfolio and the associated allocation of our resources, capital cost and people,” McLoughlin said in the call. “All this work will be under the advisement and supervision of the board. We, of course, will conduct this work with rigor, objectivity and urgency.”