The company reported an 11% year-on-year drop in net sales to $1.98bn during the quarter, a drop in gross margins to 31.7% in the third from 34.5% last year, and a 27% decrease in adjusted EBIT to $283m.
“We expected this would be a challenging quarter and we recognized that there would be headwinds as we lapped the peak of COVID-19 demand, managed the volatility of current market dynamics and continue to navigate our own transformation agenda,” CEO Mark Clouse told analysts June 9 during the company’s third quarter earnings call.
But, he noted, the quarter also brought unexpected challenges and those that were anticipated were “intensified, especially around inflation and some of the transitional costs moving out of the COVID-19 environment.”
Still, he said, “We have plans and pricing already in place as we exit the fiscal year and enter fiscal 2022. Our confidence is further strengthened by our continued in-market momentum and the structural health of our businesses and brands.”
He also touted the company’s “healthy retention of new and younger households and the full recovery of distribution levels,” and noted that sales compared to 2019 were up across segments.
Three ‘buckets’ of trouble
The causes of the dramatic drop in Campbell’s margin from a year ago can be grouped into “three main buckets,” including “external factors,” “transitional items” and “execution,” said Clouse.
Of the three buckets, external factors appeared to take the company off guard the most as Clouse described them as “larger than we anticipated.”