Campbell Declines After Saying Inventories Could Hurt Profit

Campbell Quarterly Profit Tops Estimates Amid Higher Prices
Campbell Soup Co. shares had gained 11 percent this year through Nov. 19. Photographer: Andrew Harrer/Bloomberg

Campbell Soup Co., the world’s largest soup maker, fell the most in more than 10 months after saying earnings this quarter could be “negatively impacted” amid high soup inventories and an increase in marketing spending.

Campbell declined 2 percent to $36.21 at the close in New York, the biggest one-day drop since January. The shares have gained 8.9 percent this year.

Chief Financial Officer Craig Owens said on a conference call today that earnings per share in the second quarter ended Jan. 31 will likely lag behind the company’s annual profit growth rate because U.S. stores stocked up early on broth and ready-to-serve soups for the holiday season. Retailers accelerated holiday buying in the first quarter in part because Thanksgiving is early this year, Owens said.

“Coming into the quarter, we had a higher level of inventory,” Chief Executive Officer Denise Morrison said on the conference call. “We maintained that and so coming out of the quarter, we’re still at those levels. So we just wanted to manage people’s expectations.”

Net income in the first quarter fell 7.5 percent to $245 million, or 78 cents a share, from $265 million, or 82 cents, a year earlier, the Camden, New Jersey-based company said today in a statement. Excluding acquisition and restructuring expenses, profit totaled 88 cents a share. The average of 17 analysts’ estimates compiled by Bloomberg was 85 cents.

Morrison has been working to boost sales in the company’s Simple Meals business, its largest unit, by adding new varieties of soups and sauces. Sales in the Simple Meals unit rose 3 percent to $896 million in the quarter, driven by a 2 percent increase in prices.

‘Slackening’ Demand

Revenue increased 8 percent to $2.34 billion. Analysts projected $2.37 billion, the average of estimates compiled by Bloomberg.

Sales of U.S. beverages, which include V8 vegetable juice, declined 5 percent in the quarter. Morrison said “beverages continued to be challenged by slackening consumer demand.”

During the quarter, Campbell completed the acquisition of Bolthouse Farms, which contributed $171 million to a total of $323 million in its foodservice unit.

After lowering marketing spending in the first quarter, the company plans to increase outlays for new products this quarter, including Campbell’s Go! soup and Skillet sauces, Owens said.

U.S. soup sales increased 2 percent in the first quarter, driven by volume gains in Campbell’s Chunky canned soups.

The company in September said it would close two plants employing more than 700 workers to help save $30 million a year.

Hurricane Sandy might have given the company a small boost as shoppers in affected areas stocked up on canned soups before the storm, David Driscoll, an analyst for Citigroup Inc. in New York, said in a report before the results were released.


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