(Bloomberg) -- The struggles at Campbell Soup Co. burst into full view on Friday.
The abrupt exit of Chief Executive Office Denise Morrison and the announcement of a strategic review even before a new leader is in place hinted at chaotic decision-making behind the scenes.
Investors, who were also digesting a full-year forecast that fell short of estimates, reacted wearily to the uncertainty surrounding the canned-soup maker. Pessimism on a conference call that followed the results helped push shares down as much as 12 percent to $34.35, the biggest intraday decline in almost two decades.
Morrison, 64, who took the helm in 2011, is the latest chief executive to fall victim to the slump in the U.S. packaged-food industry that claimed the leaders of Kellogg Co. and Mondelez International Inc. She tried -- and failed -- to move beyond canned soup to ignite sales growth as Americans change how they eat and shop.
“They’ve had a rough go of it,” said Michael Halen, an analyst at Bloomberg Intelligence. “The move into the fresh business has been problematic -- they’ve had a lot of things that didn’t work.”
But the turmoil of Friday’s announcement points to problems specific to Campbell. In the quarter ended April 29, the company took another writedown on a fresh-food business that Morrison bought as part of her first big deal as a CEO, hurting the operating margin, which slumped to a historic low.
While the timing of her retirement was unexpected, the ongoing struggles at the C-Fresh unit were likely at the root of it, according to Brittany Weissman, an analyst at Edward Jones.
“It’s been a never-ending thorn in their side,” she said. “It’s not getting any better -- that seems to be the crux of the problem.”
Morrison will be replaced on an interim basis by Keith McLoughlin, a 61-year-old former CEO at Electrolux who has been a board member since 2016. The company didn’t say who will permanently succeed her, but last month it promoted industry veteran Luca Mignini to chief operations officer, putting him in line to take over the top job.
The Camden, New Jersey-based company also said it will start a strategic review of its businesses, which will “take several months to complete.” It plans to update investors on the outcome when it reports fiscal fourth-quarter results in late August.
On the earnings conference call Friday, CFO Anthony P. DiSilvestro -- who’s been in the job since 2014 -- referred three times to decisions made by the “former management team” about the company’s strategy. Interim Chief McLoughlin said Campbell has “talented candidates" within the company to take over, but needs to examine its business before picking a new leader.
“It’s hard to know precisely what we need in that role until we complete the review,” he said.
Whoever replaces Morrison will face the same challenges that have mired the industry. The 10 largest packaged-food companies, including Campbell, Kellogg and Mondelez, have seen almost $20 billion in revenue evaporate over the last three years, as consumer loyalty to big national brands fades across the grocery store.
Food giants have struggled to keep up with the fast-moving trends, with upstarts like Chobani yogurt and Kind snack bars stealing market share.
Even before Friday’s slump, Campbell’s shares had dropped 38 percent in the past two years. Kellogg was down 19 percent and Mondelez down 8.6 percent -- in a period when the Standard & Poor’s 500 soared 33 percent. Kellogg, Mondelez and most packaged-food stocks fell after the Campbell news on Friday.
With the departure of Morrison, who has spent 15 years in total at Campbell, the number of female chief executives in the S&P 500 is down to 23, or 4.6 percent, according to Catalyst, a nonprofit that focuses on women in the workplace.
Less than a year later after Morrison became CEO, she bought Bolthouse Farms, a maker of fresh juice and salad dressing that also operated a carrot-farming business. The deal was seen as a way to push the canned soup company into fresher and more natural on trend with modern consumers. But the merger has been hampered by operational issues and a recall.
Campbell has been seeking other sources of growth. In December, the company agreed to buy Snyder’s-Lance in a bid to push deeper into salty snacks -- a bright spot in the struggling packaged-food industry. That deal gives Campbell brands such as Cape Cod potato chips and Snyder’s pretzels.
The recently promoted COO, Mignini, 55, joined in 2013. He had been running the snacks unit, and is now overseeing Campbell’s soup business in addition to managing the expanded portfolio of snacks.
On the Friday call, analysts asked why Campbell was undertaking the strategic review without first naming a new chief. Interim CEO McLoughlin said the focus, at the moment, is on “righting the ship.”
“This buys them time to get it right,” said Halen, the Bloomberg Intelligence analyst. “It allows them to reset expectations.”
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