Campbell Soup Company sales decreased 1 percent in Q2
Sales decreased 1 percent to $2.171 billion driven by the decline in organic sales, partially offset by the favorable impact of currency translation.
Organic sales decreased 2 percent driven by lower volume and higher promotional spending.
Gross margin increased from 37.2 percent to 38.0 percent. Excluding items impacting comparability in the prior year, adjusted gross margin improved 0.7 percentage points.
The increase in adjusted gross margin was primarily driven by productivity improvements and the benefits from cost savings initiatives, partly offset by higher supply chain costs and inflation, as well as higher promotional spending.
The adjusted gross margin increase reflects the continued gross margin expansion in Americas Simple Meals and Beverages.
The increase in supply chain costs was primarily driven by higher carrot costs in the quarter due to the adverse impact on crop yields of heavy rains in December and January.
Marketing and selling expenses increased 6 percent to $237 million. Excluding items impacting comparability in the prior year, adjusted marketing and selling expenses increased 5 percent primarily due to higher advertising and consumer promotion expenses.
Administrative expenses decreased 5 percent to $139 million. Excluding items impacting comparability in the prior year, adjusted administrative expenses decreased 3 percent primarily due to lower incentive compensation costs compared to the prior year, partly offset by higher benefit-related costs and investments in long-term innovation.
EBIT decreased 50 percent to $205 million, principally driven by the impairment charges in the current-year quarter.
Excluding items impacting comparability, adjusted EBIT decreased 1 percent to $417 million reflecting lower sales and higher marketing and selling expenses, partly offset by a higher adjusted gross margin percentage.
Net interest expense increased 4 percent to $28 million reflecting higher average interest rates on the debt portfolio, partly offset by lower levels of debt. The tax rate increased to 42.9 percent as compared with a tax rate of 31.5 percent in the prior year.
Excluding items impacting comparability, the adjusted tax rate decreased 3.8 percentage points to 27.8 percent as the timing of tax expense on an adjusted basis was favorably impacted by the goodwill impairment.
The outlook for the full-year adjusted tax rate remains unchanged and is expected to be approximately 32 percent. ■
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