Campbell's profit dips as soup sales remain cold

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By CANDICE CHOI, Associated Press

NEW YORK (AP) — Campbell Soup Co. is still struggling to heat up its lukewarm soup sales, with net income slipping by 5 percent in the latest quarter even as the company spent more on marketing.

The Camden, N.J.-based company known for its red and white soup cans is pushing to regain lost ground amid growing competition and evolving consumer tastes. To attract busy, younger consumers, for example, Campbell plans to roll out a variety of soup pouches in flavors like Moroccan chicken and coconut curry early next fiscal year.

At the same time, however, the company has had to raise prices to offset higher costs for ingredients, and volumes are continuing to slip in key categories. In June, the company plans to raise prices on its condensed soups by another 5 percent.

Despite an improvement in overall sales trends, CEO Denise Morrison said in a conference call that she was "not happy" with the U.S. soup sales in the latest quarter.

"We have just hit the point of stabilization — I haven't declared victory yet," Morrison said. She said the company did not strike the right balance in pricing, promotions and advertising in the quarter.

For the year, Campbell said it still expects its adjusted earnings per share to fall between 5 percent and 7 percent from last year, which would indicate a profit of $2.35 to $2.42.

For the three months ended April 29, Campbell said it earned $177 million, or 55 cents per share. That compares with a net income of $187 million, or 57 cents per share, in the same quarter last year.

Excluding one-time items such as restructuring costs, the company earned 56 cents per share. By that measure, analysts polled by FactSet expected 52 cents per share on average.

Total revenue for the quarter rose to $1.821 billion, from $1.813 billion. Analysts expected revenue of $1.818 billion. Gross profit margin fell to 38.8 percent, from 40.4 percent, as a result of higher commodity and promotional costs.

Sales of U.S. soups fell 3 percent from a year ago, as a result of declines in Campbell's condensed soups, ready-to-serve soups and broths. Sales of its Prego pasta sauce rose 3 percent, as increased advertising for new flavors drove up volumes.

The global baked goods and snacks unit saw a sales gain of 3 percent to $543 million, driven by higher prices for its Pepperidge Farm products. Goldfish snack crackers saw double-digit increases. Still, operating earnings for the broader baking and snacking segment fell to $73 million from $82 million a year ago, as a result of higher commodity costs and promotional spending.

Sales in the U.S. beverages unit increased 5 percent, driven by gains in V8 Splash and V-Fusion drinks. Sales of international meals and beverages fell 1 percent, as promotional spending and currency exchange rates offset price hikes.

Shares of Campbell fell 65 cents, or 2 percent, to close at $32.75 Monday.

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