Campbell Soup Company reported its first-quarter results for fiscal 2016. Sales decreased 2 percent to $2.203 billion primarily due to the adverse impact of currency translation.
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Organic sales were comparable to the prior year as higher selling prices and a reduction in promotional spending were offset by volume declines.
Gross margin decreased from 35.3 percent to 34.3 percent. Excluding items impacting comparability in the current year, adjusted gross margin improved 2.6 percentage points.
The increase in adjusted gross margin was driven by productivity improvements, higher selling prices, improved supply chain performance and lower promotional spending, partly offset by cost inflation.
Marketing and selling expenses decreased 7 percent to $226 million. Excluding items impacting comparability in the current year, adjusted marketing and selling expenses decreased 15 percent to $206 million primarily due to lower advertising, reflecting a shift in spending to later in the fiscal year, as well as benefits from cost savings initiatives and the impact of currency translation. Administrative expenses increased 19 percent to $156 million.
Excluding items impacting comparability in the current year, adjusted administrative expenses decreased 8 percent to $120 million primarily due to benefits from cost savings initiatives and the impact of currency translation.
EBIT decreased 19 percent to $315 million. The first-quarter results were negatively impacted by the mark-to-market losses and charges incurred related to cost savings initiatives.
Excluding items impacting comparability in the current year, adjusted EBIT increased 23 percent to $479 million reflecting a higher adjusted gross margin percentage, lower adjusted marketing and selling expenses and lower adjusted administrative expenses, partly offset by the adverse impact of currency translation.
Net interest expense increased $3 million to $28 million reflecting higher average interest rates on the debt portfolio. The tax rate increased 0.5 percentage points to 32.4 percent.
Excluding items impacting comparability in the current year, the adjusted tax rate increased 2.2 percentage points to 34.1 percent primarily due to the geographic mix of earnings and higher U.S. state taxes in 2016.
Cash flow from operations was $218 million compared to $188 million a year ago, primarily due to higher cash earnings, partially offset by higher working capital requirements. ■