Campbell Soup Co. reported better-than-expected quarterly earnings on Monday but left its full-year forecast unchanged as it continues trying to turn around its North American soup business.
Campbell, whose shares fell 1.8 per cent in morning trade, has endured several winters of weak soup sales, hurt by heavy discounting and increased competition with other simple meals. Its chief executive, Denise Morrison, has pledged to stabilize and then grow the business by introducing new products and reinvigorating its advertising.
“Although overall sales trends are improving, we are not satisfied with our performance this quarter,” said Ms. Morrison, who took the top job last summer. “We executed well in some businesses ... we did not execute as well in others.”
U.S. soup sales fell 3 per cent in the latest quarter, hurt by declines of 5 per cent in condensed soups, 4 per cent in broths, and 1 per cent in ready-to-serve soups.
While Campbell has taken the right steps to improve its business, those moves have yet to gain traction, according to Morningstar analyst Erin Lash.
“We didn’t expect that their spending behind product innovation and marketing support would yield measurable improvements overnight, but obviously at some point we’d like to see the volume declines gradually improve,” the analyst said.
Net income was $177-million (U.S.), or 55 cents per share, for the fiscal third quarter ended April 29, down from $187-million, or 57 cents per share, a year earlier.
Excluding one-time items, earnings were 56 cents per share, topping analysts’ average estimate of 52 cents, according to Thomson Reuters I/B/E/S.
The company benefited from a lower tax rate, and a decline in shares outstanding boosted per-share earnings.
The company’s gross margin declined due to higher commodity costs, promotional spending and selling a greater number of lower-priced products. That contributed to a 13-per-cent decline in earnings before interest and taxes.
Net sales rose 0.4 per cent to $1.82-billion, topping analysts’ average estimate of $1.81-billion.
The company affirmed its full-year forecast for earnings per share of $2.35 to $2.42, adjusted for one-time items, and net sales ranging from flat to up 2 per cent. But it said sales should be near the lower end of the range, while earnings should be near the upper end, helped by a favorable tax rate.