Campbell cuts sales outlook, keeps earnings view

BOCA RATON, Florida (Reuters) - Campbell Soup Co (CPB.N) cut its fiscal 2010 sales forecast as demand flags for its more expensive ready-to-eat soup, and it also plans to overhaul the packaging and marketing of its single biggest product, condensed soup.

But the company also stood by its 2010 earnings forecast and CEO Douglas Conant indicated Campbell was poised to raise long-term growth targets in the next year or so.

Many packaged foods companies have benefited as consumers try to save money by eating at home more often. But shoppers are more selective about what they spend money on and ready-to-eat has not been enough of an attraction, even during a particularly cold U.S. winter.

"Shoppers have become increasingly price-sensitive," Conant said in a presentation to the Consumer Analyst Group of New York.

The company is committed to fixing the "price-value" equation for ready-to-serve soup, Conant said. Some analysts said that could telegraph more promotional discounting in order to jump-start the category. Conant would not give further details until the company reports quarterly earnings on Monday.

"As more meals are being eaten at home... it has also gotten very, very competitive to get your fair share of those meals," Conant said.

Meanwhile, Campbell's condensed soup business is perceived by consumers to be "stodgy," said Edward Jones analyst Jack Russo. But Campbell's Conant said sales of that soup, which is sold in the iconic red and white can, have done well.

Russo noted that competitor General Mills Inc (GIS.N) has also seen its Progresso soup business pressured.

Campbell expects sales to rise only 2.5 percent to 3.5 percent in 2010, down from a prior forecast of 4 percent to 5 percent. The average Wall Street growth forecast was 3.8 percent, according to Thomson Reuters I/B/E/S.

But it backed its 2010 net earnings per share growth outlook of 9 percent to 11 percent from fiscal 2009 adjusted earnings of $2.21. The average Reuters earnings growth estimate was about 11 percent.

SIMPLIFYING SOUP

Campbell is planning $150 million to $200 million in annual cost savings by cutting down overhead after selling off several businesses in the past several years.

The company is also simplifying soup production by using fewer varieties of ingredients and packaging.

Conant said the company should be in a position in the next year or so to raise its long-term earnings and sales goals. Those goals are currently 3 to 4 percent annual sales increases and 5 to 7 percent earnings per share growth, excluding one-time items.

"We've delivered 8 percent (earnings growth) for the last five years. We ought to be able to raise our targets."

But "it would be premature to do that in a time when the financial world is so uncertain," he added.

Campbell's condensed soup business in the United States generated more than $1 billion in net sales in fiscal 2009.

The company plans to enhance more than 60 percent of its condensed line with product improvements, further sodium reduction, updated packaging, improved shelving systems and new marketing. The new soups will be available in August.

Consumers have other choices for at-home meals, including frozen dinners, where manufacturers have aggressively offered promotional discounts in order to attract consumers.

"Many, including ourselves, have been somewhat frustrated by the seeming complacency with which Mr. Conant has addressed sales issues of late," J.P. Morgan analyst Terry Bivens said in a research note.

Campbell shares were up 10 cents or 0.3 percent at $33.69 on the New York Stock Exchange on Wednesday afternoon.

(Additional reporting by Dhanya Skariachan and Ben Klayman; Editing by Derek Caney, John Wallace and Matthew Lewis)