PHILADELPHIA (AP) — The Campbell Soup Co. sold more cans of soup in its fiscal second quarter, but at such deep discounts it drove down the company's profit.
The quarterly decline was expected, but it came with some other bad news from the food maker. The outlook for the rest of the year is cloudy enough that Campbell lowered its full-year earnings and revenue guidance for the second time in about three months.
The Camden, N.J., company said Friday that its income fell 8 percent and sales were down 1 percent.
Campbell says it now expects full-year revenue to be essentially flat — between a 1 percent decline and 1 percent growth, and earnings per share to fall by 1 to 3 percent. To achieve that, Campbell will have to have a stronger performance in between now and the end of July than it's had over the past six months.
Previously, the company said it expected earnings for the year to be up by 2 to 4 percent, or between $2.52 and $2.57 for the full year. The revised guidance is for a profit between $2.40 and $2.45 per share.
The second-quarter result matched Wall Street expectations — and for exactly the reasons analysts were expecting.
Campbell President and CEO Doug Conant said the company used heavy promotions to sell a higher volume of soup in the U.S.
But the company still didn't sell as much as it had hoped — and promotional spending was so high that it wiped out any gains in revenue. Conant said that was the right strategy to keep customers.
"Just a year ago, we were losing some of our consumer base to other simple meals," he told analysts on a conference call Friday. "We said we have to reverse that, and we have."
Company officials were mostly upbeat about their prospects despite the lower outlook, Rob Moskow, who follows the company for Credit Suisse, was not as optimistic, telling officials on Friday's conference call: "Soup did not go according to the plan."
Wall Street also judged the company harshly Friday. The stock price closed at $33.58, down $1.36 or nearly 4 percent from Thursday's close.
Revenue from ready-to-serve soups fell 4 percent. The company says declines in its relatively pricey microwavable soups were responsible for most of that. Meanwhile, revenue from highly profitable condensed soups, which have had labels redesigned and supermarket displays reconfigured, fell 7 percent.
The company said that competitors lured some customers away by dropping ready-to-serve prices so low that some shoppers were forsaking Campbell's condensed soup for the more convenient varieties.
Broth sales, meanwhile, rose, as people used those products for more holiday meals. The baking and snacking line, including Pepperidge Farm cookies and crackers, was up 8 percent.
Conant said the company plans to do more advertising in the second half of the fiscal year, but go lighter on in-store price promotions. That's a common pattern as the weather warms up and stores lose interest in trying to lure shoppers with specials on soup.
Campbell officials that after a calendar 2010 with practically no cost inflation, they are also expecting to pay more for grains, oils and steel cans. Baked good prices have already been raised in reaction to rising prices.
For its fiscal second quarter, the company earned $239 million, or 71 cents per share, for the period ended Jan 30. That's down from $259 million, or 74 cents per share, a year earlier. Revenue dropped 1 percent to $2.13 billion.
For the first six months of the fiscal year, the company earned $518 million, or $1.54 per share, down 9 percent from the first half of the previous fiscal year, when it earned $563 million, or $1.62 per share. Revenue for the six-month period was down 1 percent to $4.3 billion.