Campbell Soup's 1Q results miss expectations as soup sales decline; cuts forecast for year

NEW YORK, N.Y. – Americans’ shift toward fresh foods is kicking Campbell Soup right in the can.

The company on Tuesday said its quarterly profit fell 30 per cent, hurt by a later Thanksgiving, weaker demand for its biggest products and a rise in marketing costs. A recall of its recently acquired Plum Organics products also hurt results and the company cut its outlook for the year.

Shares of Campbell Soup fell 6 per cent to close at $39.20. Over the past year, its stock is up more than 13 per cent.

Campbell Soup, based in Camden, N.J., has been trying to reshape its image as a purveyor of shelf-stable canned and packaged products that are sold in the centre aisles of supermarkets. The push comes as people increasingly reach for foods they feel are fresh, migrating toward the perimeters of grocery stores where produce, meats and dairy are sold.

To better connect with Millennials who tend to shun canned products, Campbell introduced soups in bright, new plastic pouches and dinner sauces in black packages meant to conjure the blackboard menus at cafes. But the company is still facing competition from the growing prepared foods sections in supermarkets and other outlets that offer fresh, hot soups.

In a call with analysts, Chief Financial Officer Craig Owens declined to specify what percentage of it soup sales come from such new products.

“It’s still pretty small. It’s not a very significant portion of our soup sales,” he said.

CEO Denise Morrison also cited the “proliferation of specialty beverages and packaged fresh juices” for putting its V8 beverage category under pressure. Like its soups, V8 drinks are shelf-stable and don’t have to be refrigerated until they are opened. Morrison said she doesn’t expect the beverages to be a growth driver this year.

As the company works to refresh its core offerings, Morrison is also working to expand into new areas. Campbell’s recent acquisitions of Bolthouse Farms juices and Plum Organics baby food were intended to give the company a foothold in the faster-growing category known as “fresh packaged goods.” But Campbell has already stumbled and earlier this month recalled some Plum Organics products because they were spoiling unexpectedly.

For the quarter, U.S. soup sales declined 6 per cent and beverages fell 8 per cent. The company said that the later Thanksgiving this year hurt results, with some shipments being pushed off to the current quarter.

But Morrison also noted that retailers were adjusting to a weak consumer environment.

Sales for the global baking and snack division increased 6 per cent. Campbell, which also makes Pepperidge Farm, said it plans a national launch of Goldfish-branded macaroni and cheese this quarter.

Campbell Soup Co. earned $172 million, or 54 cents per share, for the period ended Oct. 27. That’s down from $245 million, or 78 cents per share, in the fiscal first quarter a year earlier.

Excluding one-time costs, it earned 66 cents per share. That was 20 cents shy of analyst expectations, according to FactSet.

Revenue dipped 2 per cent to $2.17 billion, also short of the $2.29 billion Wall Street expected.

Campbell Soup now expects adjusted earnings for the fiscal year ending on Aug. 3, 2014 to increase between 2 per cent and 4 per cent, or $2.53 to $2.58 per share. Its prior guidance called for adjusted earnings growth of 3 per cent to 5 per cent.

Revenue is forecast to rise by 4 per cent to 5 per cent.

Analysts expect earnings of $2.59 per share on revenue of $8.48 billion for the year.


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