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Canned by Campbell
Campbell Soup's CEO resigns

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By Jeff Fischer (TMF Jeff)
March 23, 2000

You probably heard that the CEO of Campbell Soup (NYSE: CPB), Dale Morrison, resigned last night. As Fool News reported this morning, the resignation was disclosed in a terse press release from the company that didn't provide a reason why the CEO left after three years at the helm. The company only shared that David Johnson, Campbell's CEO from 1990 to 1997, will resume the CEO position again until a replacement can be found.

Since a replacement hasn't been named, it is logical to assume that the resignation was arrived at without much planning. Whether Dale Morrison resigned of his own free will is not worth speculation. However, Campbell's stock performed very well when David Johnson was the CEO, so perhaps the idea of appointing Johnson as CEO again -- until a permanent replacement is found -- was initiated by the family who owns a majority of the company's tightly held stock.

Whatever the reasons, Dale Morrison probably isn't to blame. Although he was a relative newcomer to the company compared to former CEO David Johnson, he was far from timid in working to improve Campbell's business. He did inherit inventory problems that he saw worked through, and that was a tough decision to make because it impacted near-term results, and he also "inherited" a difficult selling environment for soup the past three years.

Meanwhile, Campbell's management was busy divesting the company of many underperforming divisions and acquiring international soup leaders, rather than being altogether focused on growing sales. Only recently has Campbell been in a position to focus on earnings and soup volume growth without the distraction of buying and selling business divisions in a company-wide reconfiguration.

Campbell's new business is much more focused than it was just three years ago, and it has much better profitability ratios, too. Despite what CBS MarketWatch wrote (repeating twice that "profit margins" are a problem at Campbell Soup), margins have improved significantly over the past three years, and they improved in the last quarter and in the past six months, too, as we recently showed.

When a company tries many initiatives to improve its stock's performance, though, and it just doesn't work, eventually shareholders will demand significant change. At this time, typically, all eyes go to the CEO -- the CEO being the most visible scapegoat. Whether or not Dale Morrison is responsible for Campbell's woes (I personally don't see how one man could be responsible for a slow soup market), shareholders wanted change and changing the CEO was the largest change possible. (The CEO of Coca-Cola resigned last year, too, perhaps in a similar situation. Was it his fault that worldwide soda sales were poor?)

Perhaps this change will work at Campbell. Perhaps new energy at the helm of the company can light a fire that will cause a chain reaction of change that eventually will find its way to the bottom line in earnings and then in the share price. Perhaps. Or perhaps not. Whatever the outcome, it will take time to see it come to fruition.

Campbell Soup's stock will likely drift as listlessly in the near future as it has during the past year. Until a permanent CEO is in place, it is not likely that Campbell will institute major, aggressive initiatives. Management and the majority shareholders will probably want to have a permanent CEO in place before cranking up all of the company's engines again and trying to move forward with verve. This makes sense.

Overall, in the long run perhaps the change will prove beneficial on many levels. Nobody knows the company's culture better than those at the company, and for some reason apparently Dale Morrison as CEO wasn't working out. At least, that's what we'll assume. Sometimes shareholders merely demand change for its own sake if recent years have been difficult. Sometimes when a company is "majority-controlled" by a single family, change comes through a directive. Whether or not this happened at Campbell Soup, the company serves as a reminder that public companies that are majority-controlled by one family sometimes present investors with more risks and unforeseen factors than do companies that are controlled in a more democratic fashion.

At $29 per share, Campbell trades at 15 to 16 times year 2000 (ending in July) earnings estimates. To discuss the company, visit us on the Drip Companies board. And Fool on!

--Jeff Fischer, TMF Jeff on the boards.

P.S. It's the last night to play Oscar Wildness! The winner receives a $500 account with BuyandHold.com.

Drip Portfolio

3/23/2000 Closing Numbers
Ticker Company Dly Pr Chg Price
CPBCAMPBELL SOUP3/8$30.06
INTCINTEL CORP-1 7/16$142.63
JNJJOHNSON & JOHNSON-2 1/4$80.00
MELMELLON FINANCIAL CORP7/16$33.19

  Day Week Month Year
To Date
Since
7/28/1997
Annualized
Drip -.81% 5.82% 19.05% 25.91% 63.58% 20.36%
S&P 500 1.78% 4.29% 11.78% 3.95% 62.69% 20.11%
S&P 500(DA) 1.78% 4.29% 11.78% 3.95% 65.32% 20.84%
S&P 500(DCA) n/a n/a n/a n/a 34.55% 11.82%
NASDAQ 1.56% 2.97% 5.19% 21.41% 214.77% 54.00%

Trade Date # Shares Ticker Cost/Share Price LT % Val Chg
9/8/199722.9859INTC45.653$142.63212.41%
11/14/199713.323JNJ79.310$80.000.87%
11/5/199831.5773MEL34.290$33.19-3.22%
4/13/19988.269CPB54.401$30.06-44.74%

Trade Date # Shares Ticker Cost Value LT $ Val Ch
9/8/199722.9859INTC$1,049.37$3,278.36$2,228.99
11/14/199713.323JNJ$1,056.65$1,065.84$9.20
11/5/199831.5773MEL$1,082.79$1,047.97($34.82)
4/13/19988.269CPB$449.84$248.59($201.25)
  Cash: $24.47  
  Total: $5,665.23  


Key
• S&P 500 (DA) = dividend adjusted. Dividends have been added to the total return of the index.

Note
Drip Port launched with $500 on July 28, 1997, adds $100 to invest every month, and the goal is to own $150,000 in stock by August of the year 2017. Due to the slow nature of dollar-cost-averaging and our relatively significant starting costs, we do not expect to seriously challenge the S&P 500 for the first three to five years as we build an investment base. The long-term advantages of dollar-cost-averaging still overcome the short-term disadvantages, however. Final note: our investment in Campbell Soup is frozen due to fees instituted in its investment plan. Click here for a history of all Drip Port transactions.