Campbell Soup CPB-N surpassed Wall Street expectations for quarterly profit on Wednesday, as higher prices for its snacks and packaged food meals helped counter a slowdown in demand from budget-conscious consumers.
Shares of the company, which expects to complete the acquisition of Rao’s owner Sovos Brands by next year, rose about 5 per cent in early trading, after it also reaffirmed its full-year 2024 outlook.
“It’s encouraging to see that Campbell is reaffirming guidance … there might have been some concern that Campbell would have lowered guidance this quarter,” said CFRA Research’s Arun Sundaram.
Global staple food makers have consistently raised prices over the past year to counter higher input and labour costs, even as some expenses like those linked to supply chain have now come down from their peaks.
Average selling prices in Campbell’s meals & beverages division rose 2 per cent in the quarter, while prices for its snacks brands – including Goldfish crackers and Cape Cod potato chips – rose 5 per cent.
However, overall volumes dropped 5 per cent as customers chose to switch to cheaper alternatives like private-label brands amid persistent inflation.
“Ready-to-serve and condensed eating (soup) businesses experienced more pressure in the quarter,” said CEO Mark Clouse adding that in the last four weeks, which included the Thanksgiving holiday, Campbell saw improvement in all segments.
Analysts also believe Campbell might have to step up its promotional activity in order to gain market share. In the quarter, marketing and selling expenses increased 10 per cent.
Peers General Mills and Kellanova have also topped quarterly sales and profit estimates, helped by increases in pricing even as demand has wavered in recent months.
Net sales at Campbell dropped 2 per cent to $2.52-billion, in line with analysts’ expectations, according to LSEG data.
Campbell earned an adjusted profit of 91 cents per share, beating estimates of 88 cents.