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Campbell Soup says 2018 to be difficult, warns of sales drop
August 31, 2017 / 11:28 AM / 22 days ago

Campbell Soup says 2018 to be difficult, warns of sales drop

FILE PHOTO: Tins of Campbell's Tomato Soup are seen on a supermarket shelf in Seattle, Washington, U.S. February 10, 2017. REUTERS/Chris Helgren/File Photo

(Reuters) - Campbell Soup Co (CPB.N) posted quarterly earnings below Wall Street estimates and warned fiscal 2018 sales could decline as the company was unable to reach an agreement with a key customer for a promotional program ahead of the holiday season.

Shares of the maker of packaged goods brands, including Pepperidge Farm snacks and Prego pasta sauce, fell 5.9 percent to $47.28 on Thursday.

Campbell Soup, like other packaged food makers, has been struggling as consumers opt for organic, healthier alternatives instead of processed foods and make more purchases online than at stores, which are the company’s biggest distributors.

Despite making inroads into fresh foods through its acquisition of Bolthouse Farms and Plum Organics, the unit has been unable to consistently report a profit in the last few quarters.

Sales at Campbell’s fresh foods business, rose 1 percent, however, the unit had an operating loss of $8 million in the quarter.

“Looking ahead to fiscal 2018, we expect the operating environment to remain difficult,” Chief Executive Denise Morrison said in a statement.

On a post-earnings call, Morrison said soup sales in the United States would fall, particularly in the first half, as it was unable to reach an agreement over a promotional program with a key customer.

“We expect significantly weaker performance in the first half and relatively better performance in the second half of this fiscal year,” Chief Financial Officer Anthony DiSilvestro said on the call.

Campbell expects fiscal year 2018 sales to be flat to down 2 percent, which translates to $7.89 billion to $7.73 billion, and adjusted profit to be $3.04 to $3.11 per share.

Analysts on average had expected revenue of $8.01 billion and earnings of $3.19 per share, according to Thomson Reuters I/B/E/S.

“The quality of the quarter was soft, in our view...the quarter would have been much worse had CPB not pulled back on marketing,” J.P. Morgan analyst Ken Goldman said in a note.

Excluding certain items, the company earned 52 cents per share. Net sales fell 1.4 percent to $1.66 billion due to weak demand for its V8 vegetable juices and as retailers stocked up on fewer soup products.

Analysts on average had expected a profit of 55 cents per share and revenue of $1.69 billion for the company’s fourth quarter.

Reporting by Gayathree Ganesan in Bengaluru; Editing by Shounak Dasgupta

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