Campbell Soup Company reported its third-quarter results for fiscal 2020 with a net sales increased 15%.
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Mark Clouse, Campbell’s President and CEO, stated, “Since the onset of the COVID-19 pandemic, we have simplified our mission to keep our people safe, while meeting the urgent need for food and supporting the communities in which we operate. I am incredibly proud of how the entire Campbell organization has mobilized and want to thank our team, especially those on the front lines, for continuing to step up to ensure our food is readily available across North America.”
“In the quarter, we experienced unprecedented broad-based demand across our brands as consumers sought food that delivered comfort, quality and value. This demand resulted in double-digit increases in organic sales, adjusted EBIT and adjusted EPS. In addition, Campbell’s products were purchased by millions of new households, with total company household penetration increasing over 6 percentage points in the quarter compared to the third quarter of fiscal 2019,” continued Mark.
Net sales increased 15% to $2.24 billion. Organic net sales, which exclude the impact from the divested European chips business, increased 17% from the prior year driven by favorable volume in both Meals & Beverages and Snacks reflecting increased demand for at-home food consumption with the stay-at-home mandate.
Gross margin increased from 33.5% to 34.5%. Excluding items impacting comparability, adjusted gross margin increased 100 basis points to 34.7% driven by favorable product mix and improved operating leverage, as well as the benefits from supply chain productivity improvements and cost savings initiatives, offset partly by cost inflation and other supply chain costs, including mark-to-market losses on outstanding commodity hedges, driven primarily by diesel hedges, and costs related to COVID-19.
Marketing and selling expenses increased 11% to $239 million. Excluding items impacting comparability in the prior year, adjusted marketing and selling expenses increased 12%, driven primarily by increased investments in advertising and consumer promotion expenses and higher incentive compensation accruals, offset partly by the benefit of cost savings initiatives. Administrative expenses increased 3% to $154 million. Excluding items impacting comparability, adjusted administrative expenses increased 4%, primarily reflecting higher incentive compensation accruals, as well as higher general administration costs and inflation and investments in information technology, offset partly by the benefits from cost savings initiatives and lower benefits costs.
Other expenses were $81 million as compared to $20 million in the prior year. Excluding items impacting comparability, adjusted other income was $18 million compared to $8 million in the prior year.
As reported EBIT increased 11% to $273 million. Excluding items impacting comparability, adjusted EBIT increased 31% to $386 million as higher sales volumes and improved gross margin performance were offset partly by increased marketing investment.
Net interest expense was $55 million compared to $89 million in the prior year reflecting lower levels of debt. The tax rate was 23.9% as compared to 21.2% in the prior year. Excluding items impacting comparability, the adjusted tax rate increased 210 basis points to 23.6%.
The company reported EPS of $0.55 per share. Excluding items impacting comparability, adjusted EPS increased 57% to $0.83 per share, reflecting an increase in adjusted EBIT and lower net interest expense.