Mick Beekhuizen
Executive Vice President and Chief Financial Officer at Campbell Soup
Thanks, Mark. Good morning, everyone. Turning to Slide 17, as Rebecca mentioned at the start of the call from this quarter onwards we will exclude from adjusted net earnings, unrealized mark-to-market gains and losses on outstanding undesignated commodity hedges, until such time that the related exposure impacts operating results. Our adjusted financial results and guidance reflect this change.
For the first quarter as we left 8% growth in the prior-year, organic net sales declined 4%, due to the anticipated cycling of year ago retailer inventory recovery and supply pressures. The resulting year-over-year fall in [Phonetic] decline more than offset the favorable impact of net pricing in the quarter.
As Mark highlighted earlier consumer demand remains strong in [Technical Issues] basis were 5% higher, compared to two years ago or the first fiscal quarter of 2020. Adjusted EBIT decreased 15%, compared to prior year, it was 1% higher on the two-year basis, despite the significant levels of inflation on ingredients, packaging, labor, warehousing and logistics. Our adjusted EBIT margin was 17.4%, compared to 19.5% in the prior year and slightly down from fiscal 2020. Adjusted EPS from continuing operations decreased $0.12 or 12% versus prior year to $0.89 per share, but remains well ahead of fiscal 2020.
On the next Slide, I'll break down our net sales performance for the first quarter. As I mentioned, the impact of lapping the post-COVID search retailer inventory recovery and supply constraints largely related to industry-wide labor challenges along with select material constraints, held back our ability to meet the continued elevated demand. The operations team continue to execute well in a challenging environment.
Organic net sales decreased 4% during the quarter, driven by a 6 point volume headwind, which reflects lapping of the prior year retailer inventory recovery and the before mentioned supply constraints. Favorable price and sales allowances drove a 4 point gain in the quarter, which was partially offset by a 2 point headwind due to some spend back on promotional spending in the quarter closer to pre-pandemic levels. The impact of the sale of Plum subtracted 1 point. All in our reported net sales declined 4% from the prior year.
Turning to Slide 19. Our first quarter adjusted gross margin decreased by 200 basis points from 34.5% last year to 32.5% this year. Mix had a negative impact of approximately 70 basis points on gross margin as we cycled last year's retail inventory recovery and favorable operating leverage. Net price realization drove a 190 basis point improvement, due to the benefits of our recent pricing actions, partially offset by increased promotional spending.
Inflation and other factors had a negative impact of 470 basis points with the majority of the decline driven by cost inflation as overall input prices on a rate basis increased by approximately 6%. Along with other industry participants, we experienced significant inflation across all input cost categories, including ingredients, packaging, labor, warehousing and logistics. That said, our ongoing supply chain productivity program contributed 120 basis points to gross margin, partially offsetting these inflationary headwinds. Our cost savings program, which is incremental to our ongoing supply chain productivity program added 30 basis points to our gross margin.
The previously described initiatives to mitigate inflation highlighted on the next page, include price increases and trade optimization, supply chain productivity improvements and cost saving initiatives and a continued focus on discretionary spending across the organization. We remain focused on inflation mitigation as we continue to expect core inflation for the year to be high single-digits with a more pronounced impact in the second half of fiscal 2022. As you saw on the previous page, the progress we made in the first quarter to mitigate these inflationary pressures reduced the impact to 130 basis points on our adjusted gross margin.
Moving to the next Slide. We have achieved $15 million in incremental year-over-year savings and remain on track to deliver our cumulative savings target of $850 million by the end of fiscal year. We are working towards expanding our plan to $1 billion and we'll share more details next week at our Investor Day.
Moving on to other operating items. Marketing and selling expenses decreased $38 million or 18% in the quarter on a year-over-year basis. This decrease was driven by lower advertising and consumer promotion expense or A&C and lower selling expenses. Although, A&C declined 31% as investment was moderated to reflect supply pressure, we expect it to normalize as supply strengthened throughout the year. Overall, our marketing and selling expenses represented 7.6% of net sales during the quarter and 130 basis point decrease, compared to last year.
Adjusted administrative expenses increased $17 million or 12% largely, due to expenses related to the settlement of certain legal claims as higher general administrative costs were largely offset by the benefits of cost savings initiatives. Adjusted administrative expenses represented 6.9% of net sales [Technical Issues] to summarize the key drivers of performance this quarter.
As previously mentioned adjusted EBIT decline 15% as the net sales declined and the 200 basis points gross margin contraction, resulted in a $36 million and $44 million EBIT headwinds respectively, partially offsetting this was lower marketing and selling expenses, contributing 130 basis points to our adjusted EBIT margin. This was a short-term action targeted in areas by supply constraints were most significant and we expect to fully return to targeted investment levels as soon as labor is in place and supply recovers.
Higher adjusted administrative and R&D expenses had a negative impact of 110 basis points and lower adjusted other income had a 30 basis point impact. Overall, our adjusted EBIT margin decreased year-over-year by 210 basis points to 17.4%. The following chart breaks down our adjusted EPS change between our operating performance and below the line items, a $0.17 impact of lower adjusted EBIT was partially offset by a $0.02 favorable impact from lower interest expense and a $0.04 impact of lower adjusted taxes, due to the favorable resolution of several tax matters in the quarter. This resulted in better-than-expected adjusted EPS of $0.89, which was down $0.25 per share, compared to the prior year.
Turning to the segments, in Meals & Beverages organic net sales decreased 6%, as favorable price and sales allowances in the quarter were more than offset by volume declines across US retail products, including V8 beverages, Prego pasta sauces and US Soup, as well as in Canada. Volume decreased primarily as a result of cycling the retailer inventory recovery in the prior year quarter and due to supply constraints, increased promotional spending relative to moderated levels in the prior year, partially offset the impact of recent price increases. Sales of US Soup decreased 2%, cycling 21% increase in the prior year quarter.
Operating earnings for Meals & Beverages decreased 17% to $280 million, the decrease was primarily due to a lower gross margin and sales volume declines, partially offset by lower marketing selling expenses. The lower gross margin resulted from higher cost inflation, higher levels of promotional spending, higher other supply chain costs and unfavorable product mix, partially offset by the benefits of recent pricing actions and supply chain productivity improvements. Overall, within our Meals & Beverage division, the first quarter operating margin decreased year-over-year by 260 basis points to 22.1%.
Within Snacks, organic net sales decreased 1% to $1 billion, as favorable price and sales allowances were more than offset by volume declines and increased promotional spending, compared to moderated levels in the prior year quarter. Declines in partner brands Pop Secret popcorn, driven by elevated prior year demand and Late July snacks due to supply pressures were partially offset by gains in Goldfish crackers and Pepperidge Farm cookies. Sales of power brands increased 30%.
Operating earnings for Snacks decreased 5% for the quarter, driven by increased administrative expenses, due to the settlement of certain legal claims and a slightly lower gross margin, partially offset by lower marketing and selling expenses. The slight decline in gross margin resulted from higher cost inflation, unfavorable product mix and higher level of promotional spending, largely offset by the benefits of recent pricing actions. Supply chain productivity improvements and cost savings initiatives and lower other supply chain costs. Overall within our Snacks division first quarter operating margin decreased year-over-year by 60 basis points to 13.2%.
I now turn to cash flow and liquidity. Fiscal 2022 cash flow from operations increased from $180 million in the prior year to $288 million, primarily due to lower working capital related to outflows mostly from accounts payable and accrued liabilities, partially offset by lower cash earnings. Our year-to-date cash outflows for investing activities were reflective of the cash outlay for capital expenditures of $69 million, which was comparable to prior year.
In light of the current operating environment, we are reducing our planned full-year capital expenditures from $330 million to approximately $300 million for fiscal 2022. Our year-to-date cash outflows for financing activities were $220 million, the vast majority of which are $179 million, represented the return of capital to our shareholders, including a $160 million of dividends paid and $63 million of share repurchases during the quarter.
At the end of the first quarter we had approximately $475 million remaining under the current $500 million strategic share repurchase program. We also have $250 million anti-dilutive share repurchase program, of which approximately $176 million is remain. We ended the first quarter with cash and cash equivalents of $69 million.
Turning to Slide 28, as covered earlier, adjusted net earnings now excludes unrealized mark-to-market gains and losses on outstanding underestimated commodity hedges and the guidance for adjusted EBIT and adjusted EPS growth rates reflect this change. We continue to expect full-year fiscal 2022 net sales, adjusted EBIT and adjusted EPS performance to be consistent with the guidance we provided during our fiscal year-end earnings call.
Overall, we expect accelerating inflationary pressures and higher labor-related costs to be partially mitigated with sustained in-market momentum, while at prior year results in the second quarter, we expect topline performance to improve sequentially year-over-year, as supply begins to recover. However, with respect to margin, we expect continued pressure driven by additional core inflation across commodities and higher labor-related costs without the benefit of our second wave of pricing, which will not be in place until the end of the second quarter.
As we move into the second half of the year, we expect our inflation mitigation actions collectively along with the continuous recovery of labor to result in margin progress and earnings recovery through the year. For the full-year, we expect organic net sales to be minus 1% to plus 1%. Adjusted EBIT of minus 4.5% to minus 1.5% and adjusted EPS of minus 4% to flat versus the adjusted fiscal 2021 results.
The sale of Plum is estimated to have an impact of 1 percentage point of fiscal 2022 net sales. Overall, we had a positive start to the fiscal year, which was generally aligned with our expectations, thanks to all the hard work by our teams. I'm truly grateful for their continued dedication and commitment and look forward to sharing our strategy to unlock our full growth potential at our Investor Day next week.
We will now turn it over to the operator to take your questions. Thank you.
