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Campbell Soup Co CPB

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Cost Headwinds Boil Up for Campbell Soup in Q4, but Continued Brand Investments Should Prove Prudent

Erin Lash, CFA Sector Director

Analyst Note

| Erin Lash, CFA |

Heading into wide-moat Campbell Soup’s seasonally small fourth quarter, which encompasses the warm summer months in its core market of North America, the market had begun to cool on the name (partly due to concerns surrounding rampant inflation and stepped-up competition), sending shares down around 14% over the past three months. However, these macro challenges haven’t been unique to Campbell, in our view, and we surmise that the firm had been implementing a prudent strategic playbook even before the pandemic, anchored in investing to drive profitable growth in its meals and snacking arms. From our vantage point, these efforts contributed to its flat fiscal 2021 organic sales (but up 3% on a two-year stack basis), which was in line with our expectations, and a 16.6% adjusted operating margin that outpaced our expectations by 30 basis points.

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Company Profile

Business Description

With a history that dates back around 150 years, Campbell Soup is now a leading manufacturer and marketer of branded convenience food products, most notably soup. The firm's product assortment includes well-known brands like Campbell's, Pace, Prego, Swanson, V8, and Pepperidge Farm. Following the sale of its international snacking operations, which wrapped in calendar 2019, the firm derives nearly all of its sales from its home turf. Campbell has made a handful of acquisitions to reshape its product mix the past few years, including the tie-up with Snyder's-Lance (completed in March 2018), which enhances its exposure to the faster-growing on-trend snack food aisle, complementing its Pepperidge Farm lineup.

1 Campbell Place
Camden, NJ, 08103-1799
T +1 856 342-4800
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Jul 31, 2021
Fiscal Year End Aug 1, 2022
Stock Type High Yield
Employees 14,100