Campbell Soup Co posted an adjusted profit that was less than had been predicted due to a recalled product and higher costs as well as lower sales of its carrots. The company expects the same issues to dent sales the remainder of 2016.
The largest soup maker in the world also released a full-year forecast for adjusted earnings that came up short of estimates on Wall Street, sending shares tumbling by over 6.5% to a low of over six months Thursday.
The problems with the company, during the recently ended quarter centered on the Campbell Fresh business. The business has been increased through acquisitions in order to cater to the increasing preference of the consumer for organic and fresh foods rather than processed ones.
Campbell Fresh posted an operating profit that plummeted by 62% during the quarter and sales that dropped nearly 5%. The business was hurt due to a recall in June of one of its protein drinks, higher costs of carrots and lower over sales of carrots.
Campbell said it harvested carrots prematurely this past spring. That in turn resulted in carrots that were smaller, which led to customers being dissatisfied and loss of overall business.
CEO Denise Morrison said that the Campbell Fresh business performance was disappointing due predominantly to issues of execution.
The Campbell Fresh management was reshuffled over the last several weeks due to the results and several of its senior managers, including the president of the segment left, said Morrison in her conference call with analysts.
Campbell Fresh, said Morrison, would need time to regain the business it lost, which means that sales would fall somewhat during the ongoing quarter and into the next one.
Campbell Soup announced that it had improved the oversight of the complete supply chain for Campbell Fresh and that problems had been rectified in the manufacturing process and equipment that had led to its protein drinks becoming spoiled and recalled.
The attributable net loss to Campbell’s was over $81 million during the three-month period due to an impairment charge before taxes of $81 million related to the Bolthouse segment.
Excluding certain items, Campbell Soup had earnings of 46 cents a share, which came in below Wall Street estimates that were 50 cents.
Net sales were down .035% to just over $1.69 billion, which was in line with estimates by analysts.
Campbell Soup forecast its adjusted earnings to be between $3.00 and $3.09 a share for its year that ended July.