Campbells Soup, the iconic soup-in-a-can that inspired artist Andy Warhol, reported its third quarter results this week. Lockdown restrictions led consumers to stock up during March and April, driving sales 15% higher to $2.2 billion in the quarter. Organic sales increased 17%.
Campbell's brands managed to grow or hold market share in 9 of its 13 priority categories. However, the company experienced supply issues during the quarter – which led to a loss in market share for others.
Gross margins expanded 1% to 34.7%. EBIT rose 31% to $386 million. Net income for the quarter rose 100% to $168 million, or 55 cents a share, from $84 million, or 41 cents a share, in the same period a year ago. Excluding once-off items, the company earned 83 cents per share, up 57% from the same quarter last year. Profit margins were lower, but the company managed to reduce debt by $2.3 billion in Q3, bringing its Net Debt-to-EBITDA down from 5.2x to 3.2x.
Campbells Soup is comprised of two divisions: Meals & Beverages (such as soup, pasta sauces, salsa and non-dairy beverages), and Snacks (like potato crisps, biscuits and pretzels).
Within the Meals & Beverages unit sales rose 20% to $1.2 billion. Organic sales increased 21%. US soup sales soared 35% as consumers flocked to Campbell's tomato soup and grilled cheese products. Double-digit gains were also achieved in condensed, ready-to-serve options and broth. The Meals & Beverages unit saw operating profit rise 35% to $275 million.
The Snack unit saw sales climb 9% during the quarter to $1 billion. Organic sales were up 12%. Operating profit for the segment rose 19% to $154 million.
The company also upped its guidance to a range of 5.5% to 6.5% in sales, 12% to 14% in EBIT, and an EPS target in the range of $2.87 to $2.92. The company currently trades on a 9.6x historic PE and a dividend yield of 2.87%. Campbells is likely to benefit from the trend in increased home cooking, and quick easy-cook meals/snacks as long as lockdown conditions persist. The company’s share price is flat year-to-date.