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Original Source: FD (FAIR DISCLOSURE) WIRE
UNIDENTIFIED COMPANY REPRESENTATIVE: (CALL IN PROGRESS) -- managed. We also note this product improvement and emphasis on delivering the product in a more efficient way and for not only the retailer but for the consumer has certainly proven to be a moneymaking idea.
Now Doug is very easy to point out. For those of us that are standing around chattering our teeth like we're at a castanet convention, given the weather, Doug is the one walking around, saying, "Is this weather great or what?" And he will be here to tell us about the new wave of selling and brand awareness. You may have seen the press release that's outside and if you don't have it we encourage you to get it, talking about the low-sodium approach for the top-selling soups.
To discuss that and other messages of interest is Doug Conant. Doug, if you please, in advance we would like to thank you for the famous Campbell Soup and grilled cheese sandwich lunch that Len Griehs has been up since 5 this morning manufacturing. I think it's great. Great job and best to Gretchen as well. Thank you, Doug.
DOUG CONANT, PRESIDENT AND CEO, CAMPBELL: It's hard to believe. This is my sixth CAGNY. Good morning. It is a pleasure to be back with you here in Scottsdale. This is the sixth time I've presented Campbell's business to you and I intend to adopt a different approach this year. I intend to spend more time looking to the future and less time looking in the rearview mirror.
Now in prior presentations our main focus has been looking back on specific initiatives designed to advance our turnaround efforts in the near-term. Today, we will spend the bulk of our time looking forward at what we are doing to cultivate two exciting breakthrough areas that have the potential of taking our performance to an entirely new level in a very competitively advantaged fashion.
The first area is a significant growth opportunity we see in the emerging demand for Premium soup. The second area is the growth opportunity we see in lowering sodium levels across our entire soup portfolio and beyond. We are excited about both of these opportunities. I believe that will help us make soup the ultimate simple meal of choice for millions more consumers, thus enabling us to raise our performance profile over time.
Now as you'll hear this morning, we have a clear consumer-based understanding of what we need to do in each of these breakthrough areas. And in both cases, we have strong competitively advantaged propositions with which to work. So let's get started.
Please read this fascinating forward-looking statement. Also please read this equally fascinating statement regarding non GAAP measures. Thank you and now to this morning's agenda.
I will start with a brief review of our first-half performance and follow with a closer look at one of the five strategies that we are following to advance our quality growth agenda. I will then taking through our first main topic -- the growth potential in Premium soups. Then Carl Johnson, Senior Vice President and Chief Strategy Officer, will review the second growth area, sodium reduction. I will sum up and then we will have Q&A.
So let's move quickly to our business results and a summary of the key financials discussed in our Friday conference call.
For the first-half on an as reported basis. sales increased 2% to 4.4 billion; EBIT increased 4% to a little over 800 million; and earnings per share grew 19% to $1.34. However, these results contained a number of unusual items that need to be considered in order to look at our ongoing business performance.
These next three slides show the unusual items. All of these items are explained in detail in our second quarter press release which is in your information packet. Consequently, I did not intend to discuss any of these details in our session today.
This next slide better reflects the ongoing performance of our business through the first-half of the year. As you'll note through the first-half sales are up 2%, EBIT is up 6% and EPS is up 10%. This first-half performance was driven by a strong second quarter in both sales and earnings for our U.S. soups, sauces and beverages segment. As we discussed on our call last week, we expect to deliver our full year results consistent with our objective of 3 to 4% sales growth and 5 to 7% EPS growth from the adjusted fiscal 2005 base of $1.64.
So that sums up what I believe to be a very solid first-half business performance.
Now I will move straight into my next topic, the five strategies that we are following to drive our quality growth agenda. First, we have focused our growth agenda on expanding our icon brands within simple meals where we are heavily anchored in soup and baked snacks where we are heavily anchored in biscuits. Second, we will trade consumers up to higher levels of satisfaction centering on convenience, wellness, and quality. Third, we will make our products more broadly available in existing and new markets. Fourth, we will increase margins by improving price realization and Companywide productivity. And fifth, we will improve organizational diversity, engagement, excellence and agility.
Now before getting into our two breakthrough areas I'll highlight some important initiatives around our second strategy. And this is where I believe we will truly differentiate ourselves from the competition over time. As you'll hear, we are making excellent progress in trading consumers up to higher levels of satisfaction centering on convenience, wellness, and quality. These are some highlight starting with convenience.
In our core U.S. soup business this past year we launched our icon Campbell's red and white label condensed soups into a more convenient ready to eat form in microwavable bowls. Our consumers are responding enthusiastically to this innovation. Encouragingly about 50% of our sales are incremental as our microwavable soups, both bowls and cups, are expanding the soup category by appealing to new consumers and creating new usage occasions.
One other point to note. Our total annual retail sales of microwavable soups are now over $250 million. This makes Campbell's revitalized microwavable line one of the most successful launches in the grocery industry in the last five years.
Continuing on convenience, as you know making the soup (indiscernible) more convenient to shop has been a key area of focus. We have told you before about our iQ shelf maximizer and you have no doubt seen it in your local stores. In its original form shown here iQ shelf maximizer is now in some 15,000 stores covering about 55% of the ACV. I use the phrase original form intentionally as you may not be aware that we continue to evolve this innovative shelving system.
There are three recent developments of note, all of which greatly improve shopability, along with our scale and presence in the store. First we significantly upgraded the shelf graphics for our canned condensed soup portfolio to make it feel easier for our consumers defined to find their favorite varieties. We have converted about half the stores to this improved design and plan to complete the other half by the end of this fiscal year.
Second, we began to expand the iQ maximizer system to our new convenience line of microwavable bowls and cups. We now have this convenience extension in 1500 stores and plan to roll it out fully in the years ahead. Interestingly. 80% of consumers say that the shelving meaningfully improved their shopping experience by making it easier for them to find the variety they're looking for.
Third, we've been developing another extension to the iQ maximizer for canned ready to serve products. We have several leading retailers lined up and hope to install 1000 of these extensions this fiscal year and to roll them out more broadly next fiscal year.
Looking to the future we see enormous potential for developing our iQ maximizer concept still further. For example we have plans on the drawing board for a Swanson Broth maximizer. We also have plans for maximizers for smaller stores to take our coverage to 65% of the ACV and beyond. We have several more plans, all focused against our overarching goal to create an interactive simple meal section that uniquely engages the consumer, dramatically improves shopability, and helps our customers reenergize the center of the store.
Still another convenience innovation we're testing right now is the patented siyo dispenser for on-demand serving of hot soup. This is a major advance in machines of this type as this patented technology can …