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Campbell Profit Declines on Soup Promotions, Taxes

U.S. soup sales rose 2 percent
A can of Campbell's Healthy Request Cream of Mushroom soup. Photographer: Daniel Acker/Bloomberg

May 24 (Bloomberg) -- Campbell Soup Co., the world’s largest soup maker, posted a 3.4 percent drop in third-quarter profit after taxes and promotional costs increased.

Net income in the three months ended May 2 fell to $168 million, or 49 cents a share, the maker of Chunky soup and Pepperidge Farm cookies said today in a statement. Excluding some items, profit rose to 54 cents, compared with the 51-cent average of estimates compiled by Bloomberg.

Increased promotional spending cut 3 percent off sales, Campbell said. Chief Executive Officer Doug Conant has spent more on promoting his products to fend off competition from food makers touting other ready-to-serve meals, like frozen pizza or macaroni and cheese. That led to a 2 percent increase in U.S. soup sales last quarter.

“It was good to see a return to sales growth for the U.S. soup business, after several quarters of declining sales,” Erin Swanson, a Morningstar Inc. analyst based in Chicago, said in an e-mail. She recommends holding the shares.

Taxes on earnings climbed 13 percent last quarter. The company also booked costs of $12 million to revamp operations, dragging down net income.

Campbell dropped 10 cents to $35.38 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have gained 4.7 percent this year.

Sales Advance

Campbell cut its full-year sales growth forecast three months ago to a maximum of 3.5 percent from as much as 5 percent, the second straight year it has reduced its sales outlook. Total sales at the Camden, New Jersey-based company increased 6.9 percent to $1.8 billion last quarter, meeting projections. Beverage sales increased 13 percent, fueled in part by new items from the V8 brand of juices.

“Our beverages’ results benefited from compelling advertising, effective promotions and continued innovation, especially with V8 V-Fusion,” Conant said on a conference call today. “We also saw strength in V8 vegetable juice as consumers responded to our marketing efforts.”

Full-year earnings will probably come in at the high end of the forecast range, Campbell said. In February, the soup maker said full-year earnings, excluding some items, would amount to $2.41 to $2.45 a share.

Third-quarter net income was $174 million, or 49 cents, a year earlier.

(The company held conference call today. To listen to a replay, see {LIVE <GO>}.)

To contact the reporter on this story: Matthew Boyle in New York at Mboyle20@bloomberg.net

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net

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