Campbell Soup slurps up a spoonful of profit as costs fall

 
Billy Bambrough
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Campbell Soup, already a US icon, was immortalised by painter Andy Warhol in 1962
Campbell Soup, already a US icon, was immortalised by painter Andy Warhol in 1962 (Source: Getty)

Shares in US soup maker Campbell have climbed in premarket trading in New York after the company announced a better-than-expected quarterly profit due to falling costs.

The world's largest soup maker is in the midst of a cost cutting programme as it battles against falling consumer demand for non-fresh and seemingly unhealthy foods.

The numbers

Campbell reported net income of $292m (£235m), or 94 cents a share, in its first quarter, up from $194m in the year-earlier period.

Adjusted per-share earnings came to $1, ahead of the FactSet consensus of 95 cents.

Sales were more-or-less flat at $2.2bn, but beat out analyst consensus of $2.19bn.

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The company said it still expects full-year sales to be flat to up by one per cent, and adjusted per-share earnings to rise between two per cent and five per cent.

The company said that organic sales fell one per cent, hurt by its Campbell Fresh unit.

Gross margin increased to 38.2 per cent from 34.3 per cent as productivity improvements and the benefits from cost savings initiatives were partly offset by cost inflation and Campbell Fresh costs.

Why it's interesting

Campbell is in a difficult place. Last year the group initiated a restructuring drive to prepare itself for changing consumer trends that mean people are buying buying less, more often and buying much more fresh produce.

The company, which also owns the Pepperidge Farm and Prego pasta sauce labels, has been battling to maintain sales in its core market while branching out to new areas.

That move to fresh foods has not been an easy one however. Over the last period organic sales fell due to problems over the summer at Campbell Fresh.

In October, the company swapped out the head of its fresh-food division following problems with its Bolthouse Farms carrots and refrigerated juices. The company blamed poor judgement calls by management and a recall sent comparable sales tumbling.

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In June Campbell was forced to issue a recall of some 3.8m of its Bolthouse Farms protein drinks as a precaution following consumer complaints, including reports of illness.

Investors are hoping that the company's cost cutting drive, combined with its plans for its fresh food business will be enough to see it through.

What the company said

The company's chief executive Denise Morrison, who's been at the tiller for the past five years, has been praised by investors for her firm handling of the change to consumer trends.

Morrison said:

As expected, organic sales were down slightly compared to the prior year, due to the performance of Campbell Fresh. Campbell Fresh continues to rebuild capacity for Bolthouse Farms Protein Plus drinks following a voluntary recall last quarter, and remains focused on working to regain lost carrot customers over time with improved quality.

Looking ahead, I remain optimistic about plans to accelerate growth with improving trends in US soup and the upcoming launch of Well Yes! ready-to-serve soup, continued strong performance in Pepperidge Farm and a return to growth in Campbell Fresh. Our guidance for the year remains unchanged.

In short

Campbell has a long way to go but investors should take heart that its got a road map firmly planned out.

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