NEW YORK (Reuters) - Campbell Soup Co (CPB.N) reported a higher-than-expected quarterly profit on Monday and forecast full-year results at the top of its range after moving its focus from profit-sapping promotions to advertisements.
Yet the company’s U.S. soup sales fell for the fourth straight quarter, a sign that it may take some time for Chief Operating Officer Denise Morrison to turn the company around after her expected promotion to CEO this summer.
“She definitely acknowledges that change is necessary at Campbell, and she appears up to the challenge in terms of exploring opportunities that could right the ship,” said Morningstar analyst Erin Lash. She also said Campbell would need to report several quarters of improved results to prove that a turnaround was sustainable.
(For a graphic on Campbell's U.S. soup sales, click here: r.reuters.com/fyt69r)
Shares of Campbell, the world’s top soup maker, were down 1 percent at $34.89 in morning New York Stock Exchange trading.
The company has endured several winters of slow soup sales, hurt by intense competition. Its profit margins also suffered from deep discounting -- which did not spur sales as much as it had hoped -- in the first half of the fiscal year.
Campbell has since shifted spending toward advertising, which it said should strengthen its prices and brand equity over time.
“We remain focused on our plans to stabilize and then profitably grow net sales, and we are stepping up our game across the company,” COO Morrison said in a statement.
Campbell has designated Morrison as the likely successor to CEO Douglas Conant when he steps down in July. She most recently ran the North American soup, sauce and beverage unit, which includes Prego pasta sauces and V8 juice drinks in addition to Campbell’s soup.
Standard & Poor’s equity analyst Tom Graves upgraded shares of Campbell to “hold” from “sell,” citing sales and profit increases in other areas besides soup.
“Also, we expect stronger soup pricing ahead,” Graves said in a research note.
Campbell reported net income of $187 million, or 57 cents per share, for the third quarter ended on May 1, up from $168 million, or 49 cents per share, a year earlier.
Analysts on average expected 52 cents per share, according to Thomson Reuters I/B/E/S.
The company cited lower marketing expenses and a boost from the weak U.S. dollar, which increases the value of overseas sales.
Sales rose slightly to $1.81 billion from $1.80 billion, with weak volume offsetting a boost of 2 percentage points from foreign exchange rates.
Quarterly sales fell 8 percent in the soup, sauces and beverage unit. U.S. soup sales fell 7 percent, hurt by declines of 15 percent in the ready-to-serve segment, 2 percent for broths and 2 percent for condensed. Beverage sales fell 9 percent.
In the company’s baking and snacking unit, which includes Pepperidge Farm cookies and crackers, sales rose 10 percent.
“While today’s bottom-line EPS results were good, the earnings quality was weak, and we look for signals of better top-line trends to more sustainably drive the shares,” said Stifel Nicolaus analyst Christopher Growe.
Campbell said it expected full-year results to come in at the high end of its forecast, which calls for earnings per share to fall between 1 percent and 3 percent on sales ranging from down 1 percent to up 1 percent.
Reporting by Martinne Geller, editing by Gerald E. McCormick, Maureen Bavdek and Lisa Von Ahn