Campbell Soup Company

Ladies and gentlemen, thank you for standing by, and welcome to the Campbell's first quarter fiscal 2021 earnings presentation. At this time, all participants' lines are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star and then one on your telephone. Please be advised that today's conference may be recorded. If you require further assistance, please press star and then zero. I would now like to hand the conference over to your speaker today. Ms. Rebecca Gardy, Vice President, Investor Relations. Ma'am, you may begin.

Good morning, and welcome to Campbell's first quarter fiscal 2021 earnings presentation. I'm Rebecca Gardy, Vice President of Investor Relations. Following the completion of this call, a copy of the presentation and a replay of the webcast will be available at investor.campbellsoupcompany.com. A transcript of this earnings conference call will be available within 24 hours at investor.campbellsoupcompany.com. Turning to slide three, today we will make forward-looking statements which reflect our current expectations. These statements rely on assumptions and estimates which could be inaccurate and are subject to risk. Please refer to slide three or our SEC filings for a list of factors that could cause our actual results to vary materially from those anticipated in forward-looking statements. Because we use non-GAAP measures, we have included in the appendix of this presentation a reconciliation of these measures to the most directly comparable GAAP measures. On slide four, you will see our agenda. With us on the call today are Mark Klaus, Campbell's President and CEO, and our Chief Financial Officer, Mick Bakehausen. Mark will share his thoughts on our overall first quarter performance and in-market performance by division. Mick will discuss the financial results of the quarter in more detail, and review our guidance for the second quarter. We will close the call with an analyst Q&A. And with that, I'll turn the call over to Mark. Mark?

Thanks, Rebecca. Good morning, and welcome to our first quarter earnings call for fiscal year 2021. I'd first like to wish everyone all the best as we head into the rest of the holiday season. I know I am grateful this year for the entire Campbell organization, especially our colleagues in the manufacturing plants and our distribution teams who have been producing and shipping to meet the higher demand the pandemic has brought, while prioritizing the safety of our people and following our heightened implant protocols. Turning to the results, as you saw in our press release, we reported another strong quarter from both a sales and profitability perspective, with growth across all our key metrics as we continue to execute in a volatile environment and against our strategic plans. Our strong top line growth combined with gross margin expansion and value capture synergies, despite the impact of ongoing COVID-19 related costs, led to better than expected adjusted EBIT growth up 18% and a 31% increase in adjusted EPS to $1.02 per share. It also was a strong executional quarter, where we were able to strengthen supply levels to allow our retailers to improve inventory going into the crucial soup and holiday season. In addition, we announced that our board approved a 6% increase in our quarterly dividend, reflecting the company's strong earnings performance, cash flows, and increasing confidence in our long-term growth prospects, as well as our continued commitment to shareholder returns. Organic sales in the first quarter increased 8%, led by 12% organic sales growth in meals and beverages, reflecting our continued investment in our brands to attract and retain new households, as retailers also rebuilt inventory levels. Turning to our snacks division, we drove solid growth with organic sales up 4%, reflecting sales increases across the majority of our nine power brands. Our portfolio of unique and differentiated snacks remained in high demand as in-home consumption rapidly expanded. We did make some selective strategic decisions to shift promotions from the first quarter to the balance of the year to help ease supply constraints, particularly in the meals and beverages divisions. While these decisions did generate mixed share results as expected, we exited the first quarter in a much better position on retailer inventories and are seeing accelerating in-market performance as programming is ramping up into our key holiday season. We expect that that pressure of elevated demand on supply will continue in the near term, but we are building supply chain capacity and capabilities to help us better navigate this pressure and maximize availability while protecting and growing share. For the sixth consecutive quarter, our total company in-market dollar performance grew in measured channels, increasing 7%, with growth across almost the entire portfolio. Continuing the momentum from the back half of fiscal 2020, October was the ninth consecutive month in which we grew household penetration versus prior year. In our first quarter, we attracted millions of new households with the most notable increase coming from younger consumers. We also continued to see elevated repeat rates with over 70% of household gains since the beginning of the pandemic purchasing our products again. As we have said on previous calls, we consider this to be an enduring change in behavior. And given strengthening consumer trends like quick-scratch cooking and at-home eating and snacking, we remain confident that we will retain a meaningful number of these households beyond the pandemic. Within the meals and beverages division, soup net sales increased 21% with growth in all segments. This reflects retailer inventory recovery, in-market gains, and moderated promotional activity. We grew our household penetration in overall soup by 1.3 points. In addition to gaining new buyers, we are retaining these new buyers as reflected by higher repeat rates. And among millennials, we grew share for total U.S. soup by nearly one point, including significant growth of 2.7 points on condensed and over one point on ready-to-serve, demonstrating the sustained relevance of our core businesses with younger consumers. Our condensed soups were the highlight of the quarter, with double-digit net sales growth, gains in share led by cooking SKUs, and 4 million new households purchasing this quarter versus prior year. We continued to bring new ideas and recipes to consumers who are cooking more frequently at home. As these first-time cooks gain more confidence, we believe they will likely continue to use these skills to prepare more meals at home well beyond the pandemic. Our recipe solutions continue to resonate with consumers as we saw a 20% increase in overall recipe-related page views in the first quarter compared to the prior year. Within ready-to-serve, we saw solid consumption growth, but supply pressure and our decision to moderate promotions, as previously mentioned, resulted in some short-term share loss. However, as supply has improved, we are seeing improved trends, supported by our chunky NFL sponsorship activation, our slow kettle crunch innovation, and our well-yes relaunch. We expect all these factors to have a very positive impact in the second quarter. Our Pacific Foods growth engine performed well as we continued to build scale, with nearly 22% dollar consumption growth in soup and broth in the quarter. Pacific soup and broth grew share for the fourth consecutive quarter, including strong gains with millennials. Pacific has also increased points of distribution and grew household penetration as we launched our first ever national advertising campaign. Overall, we continue to feel great about the progress we've made against our win-in-soup strategy, as evidenced by our success expanding into millions of new households, attracting younger consumers, and growing all of our core brands. Turning now to the performance of our snacks power brands, which grew dollar consumption by 6% in the quarter, the most notable being late July, which grew consumption sales by 26% and share by nearly two points. We continued to run the brand's first national ad campaign throughout the quarter. Late July is a great example of how our power brands are helping consumers make the most of their snacking moments. We take a mainstream segment like tortilla chips and offer a product with higher quality, including organic product credentials, highly relevant innovation, and world-class marketing to better engage consumers, allowing them to trade up into a better snacking experience. We have successfully applied this model to other brands as well, such as Kettle Brand Shifts and Snack Factory Pretzel Crisp, which also had double-digit dollar consumption growth in the quarter. We also made significant progress on Goldfish in the quarter, with both supply and service levels improving. We have also redirected marketing aimed towards snacking options at home and restored promotional spending toward the end of the quarter. This is resulting in improved consumption and share in the most recent periods. We feel very good about our Snacks performance and the steady growth it delivers, supported by a very healthy base business. In addition, we continue to remain on plan to deliver the value capture synergies that we initially outlined as part of our acquisition of Snyder's Lance. Our investment and capacity expansion in both Goldfish and our chips demonstrate our conviction in the long-term growth potential of our brands. We are still working through some supply constraints, including a challenge in cookies, where the combination of demand and labor impacted by COVID-19 has had some negative impact on supply. Despite these isolated challenges, we feel very confident in our ability to meet the long-term demand driven by the expected sustained growth of consumer snacking behavior. Given the rapid growth of the e-commerce channel across foods, I want to touch on our enterprise performance in the quarter. Our e-commerce in-market dollar consumption results were once again impressive, growing 85% over prior year. Consumers' use of e-commerce, and particularly click-and-collect for groceries, has increased by a considerable amount these past several months, and we believe this trend will continue. Accordingly, we are investing to strengthen our capabilities and in our support of key partnerships to serve the millions of consumers who are shopping online. Given our overall financial results and the actions we've taken to start the year, we are well positioned across our entire portfolio heading into Q2 and the key soup and holiday season. With that, let me turn it over to Mick for a deep dive into our financial results.