In hot, hot summer, soup sales fall but broth and beverages give Campbell Soup Co. a boost

By Geoff Mulvihill, AP
Friday, September 3, 2010

Campbell reports Q4 profit rise on better margins

HADDONFIELD, N.J. — Summer is rarely a hot sales season for Campbell Soup Co., and this year’s sweltering June and July made that even more true, but the company said Friday that cost-cutting and strong drink sales helped its net income climb.

The results topped most Wall Street expectations, but Campbell’s outlook spooked many investors, and its shares slid 3 percent Friday.

The Camden company reported that its fourth-quarter net income rose 63 percent from the same period last year to $113 million, or 33 cents per share. Excluding one-time items from 2009’s results, the increase was 7 percent.

The company posted better production numbers and benefited from lower taxes, yet sales fell slightly compared with the same period last year, from $1.53 billion to $1.52 billion for the quarter. For the full fiscal year, they fell 1 percent, to $7.6 billion from $7.7 billion.

During the quarter, sales of both ready-to-serve and condensed soups slipped 7 percent.

The company says fourth-quarter sales alone figures don’t speak to the health of the company.

But its soup business has faltered all year, and sales are not expected to rebound strongly soon. Sales in the category fell 4.7 percent. Campbell’s expensive ready-to-serve lines like Chunky Soup were the hardest hit, with sales down 9 percent in fiscal 2010. The full-year decline followed seven straight years of growth.

Campbell is increasingly focused on frugal consumers. President and CEO Douglas Conant reiterated on a conference call with analysts Friday that the company has put a priority on increasing its revenue from condensed soup.

“I see that consumers remain very value-conscious, and the competition in our industry will remain very intense,” he said.

Campbell now expects sales growth for 2011 of 2 percent to 3 percent — just below its long-term target.

The company says there is more room to cut costs. It projected its per-share profit will rise 5 percent to 7 percent.

“Campbell is setting up for a discounting spree and, if it works, we think the stock will” rise, Jonathan Feeney, an analyst with Janney, wrote in a note Friday.

The company has boosted margins in a tough environment and there were some bright spots.

When a $14 million gain from commodity hedging last year is removed, the company’s gross margin was 40.6 percent, compared with 40.4 percent during the same period in 2009.

Sales of beverages were strong, including V8 vegetable juices, which rose 12 percent. With so many more meals being prepared at home, broth sales rose 9 percent.

For the full fiscal year, Campbell reported earnings of $844 million or $2.42 per share, up from $736 million or $2.05 per share in fiscal 2009. Excluding one-time items, the full-year profit was $862 million, or $2.47 per share, up from $794 million or $2.21 per share.

Campbell’s stock slid $1.11, or 3 percent, to $36.21.

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