* Adjusted profit 41 cents/share vs Street view 38 cents
* Sees FY profit $2.51-$2.57/share; Street view $2.52
* Shares up slightly
By Martinne Geller
Sept 4 Campbell Soup Co posted a
bigger-than-expected quarterly profit on Tuesday, after
retailers stocked up on the company's iconic red and white soup
cans ahead of a price increase.
In addition, Campbell, which also makes Prego pasta sauce,
V8 juice and Pepperidge Farm cookies, gave a profit forecast for
the new fiscal year that was largely better than Wall Street
Still, the company's shares were only up slightly in noon
trade, as gross margins fell under pressure from higher
commodity costs and investors questioned how much Campbell needs
to spend to promote products.
"We think that bulls on the name are focused mostly on the
top line, which we understand, but the gross margin should not
be overlooked," said JP Morgan analyst Ken Goldman. "We believe
Campbell remains a challenged company, one for which (earnings)
growth is expected to be very low versus the group average."
Goldman has an "underweight" rating on the stock.
After several winters when soup sales suffered from heavy
discounting and a lack of innovation, Campbell and its new chief
executive officer are trying to improve performance with a range
of new products, including Thai green curry skillet sauce and
Swanson Flavor Boost concentrated broths.
CEO Denise Morrison, who has held the top job for just over
a year, said retailers were responding favorably to the new
products, but that it was still too early to say how consumers
At an investor meeting in July, Campbell executives said the
turnaround they are trying to implement was taking longer than
expected because of a difficult market.
Their plan entails stabilizing and expanding Campbell's
North American soup and simple meals business, increasing the
company's international presence and expanding the drink and
Last month Campbell bought Bolthouse Farms, which sells baby
carrots and juices. The company said on Tuesday that it had the
financial flexibility to make another acquisition, but
opportunities were few and far between.
PRICE INCREASES SPUR DEMAND
Net income was $127 million, or 40 cents per share, in
Campbell's fiscal fourth quarter that ended on July 31, up from
$100 million, or 31 cents per share, a year earlier.
Excluding costs from the acquisition, earnings were 41 cents
per share, topping the analysts' average estimate of 38 cents,
according to Thomson Reuters I/B/E/S.
Sales were flat at $1.61 billion.
U.S. soup sales rose 9 percent, fueled by a 14-percent jump
for condensed varieties. Company executives said retailers took
on more inventory ahead of a 5-percent price increase, and that
sales in the current quarter could therefore be affected.
Ready-to-serve soup rose 1 percent, while broth sales
increased 4 percent.
The company's gross margin declined to 38.5 percent from
39.8 percent a year earlier, due to higher commodity costs and
increased promotional spending, which was only partially offset
by productivity improvements and higher prices.
Gross margin for fiscal 2013 is also expected to be down
slightly, hurt by an expected 4-percent increase in the cost of
Campbell forecast fiscal 2013 earnings of $2.51 to $2.57 per
share, excluding special items. Analysts were expecting $2.52.
The outlook includes a boost of 5 cents to 7 cents per share
from Bolthouse Farms, which is also expected to contribute about
$750 million in 2013 sales.
Campbell forecast overall sales growth at 10 percent to 12
percent this year.
The company's shares were up 17 cents, or 0.5 percent, at
$35.31 on the New York Stock Exchange in midday trade.