* Q3 adj EPS 56 cents vs Street view 52 cents
* Q3 revenue $1.82 bln vs Street view $1.81 bln
* Sees 2012 EPS at high end of range, sales at low end
* Shares down 2 percent
By Martinne Geller
May 21 (Reuters) - Campbell Soup Co disappointed investors by leaving its full-year profit forecast unchanged despite reporting better-than-expected quarterly earnings on Monday, as it continues trying to turn around its North American soup business.
Campbell, whose shares were down 2 percent, said it was on track with a plan this year to spend $100 million on new advertising, new products, and research and development meant to reignite soup sales that have gone cold amid increased competition from store brands and other options such as frozen foods.
Yet the company’s increase in overall advertising is not as substantial as it expected, since Campbell funneled some of its ad budget into promotions for baked goods, including its Pepperidge Farm Goldfish crackers.
Consumer spending on groceries -- and in particular, the ones often found in the center of the store -- is under pressure in the United States as tightened budgets cause shoppers to be more careful about what they buy.
What is more, U.S. sales of canned soup have diminished in each of the last two years, according to Euromonitor International.
Yet Campbell has its own problems, seeing its share of the U.S. wet soup market lose 2.3 percentage points over the last year. The company said other brands gained share. One of Campbell’s key rivals is Progresso, owned by General Mills .
Campbell blamed price increases and fewer discounts for weak performance in ready-to-serve soups. Part of the turnaround strategy of its new CEO Denise Morrison is to boost advertising and reduce promotions.
“We have just hit the point of stabilization. I wouldn’t declare victory yet, but we are largely where we expected to be year-to-date, despite the third quarter,” Morrison said.
Campbell raised prices on condensed soups last year and plans another increase in June, the company said, as it seeks to offset the impact of higher commodity costs.
U.S. soup sales fell 3 percent in the latest quarter, hurt by declines of 5 percent in condensed soups, 4 percent in broths, and 1 percent in ready-to-serve soups.
While Campbell has taken the right steps to improve its business, those moves have yet to gain traction, said 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,” Lash said.
Net income was $177 million, 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 sales of a greater number of lower-priced products. That contributed to a 13 percent decline in earnings before interest and taxes.
Net sales rose 0.4 percent 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 percent. 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.
Campbell shares were down 65 cents, or 2 percent, at $32.75 on the New York Stock Exchange.