By Martinne Geller
NEW YORK (Reuters) - Campbell Soup Co
Campbell, the world's largest soup maker, reported weaker-than-expected quarterly sales on Friday, after aggressive advertising and promotions failed to boost sales as much as planned. The promotions also hurt profit margins.
Campbell said it now expects 2011 earnings per share to fall between 1 and 3 percent, on sales expected to range from down 1 percent to up 1 percent. In November, it forecast growth of 2 percent to 4 percent for earnings and 1 percent to 3 percent for sales. In September it forecast growth of 5 to 7 percent for earnings and 2 to 3 percent for sales.
"The overall competitive environment remains challenging throughout the food industry, particularly in the U.S.," said Campbell CEO Douglas Conant, who will step down in July.
Campbell said it plans to ease up on promotions in the second half of the year and will instead focus on advertising and other strategies to strengthen its brand.
But its success hinges on the behavior of its key rival Progresso, owned by General Mills Inc
"The prognosis is not good, if January data are any indication," Bivens said in a research note. He said Nielsen data showed Progresso's volume jumped 30 percent in the four weeks ended January 22.
Bivens noted however that sales in the baking and snacking business, which includes Pepperidge Farm Goldfish crackers, rose 8 percent.
"Still, the Campbell shares sink or swim with the U.S. soup business," Bivens said.
Campbell shares fell to $33.80 in premarket trade from their close at $34.94 on Thursday on the New York Stock Exchange. They are roughly flat year-to-date.
COOLING SOUP SALES
Campbell's net income fell to $239 million, or 71 cents per share, in the fiscal second quarter, ended on January 30, down from $259 million, or 74 cents per share, a year earlier.
Analysts on average were expecting 71 cents per share, according to Thomson Reuters I/B/E/S.
Sales fell 1 percent to $2.13 billion, as U.S. soup sales fell 4 percent. Analysts were expecting $2.15 billion.
The U.S. soup business has endured several winters of weak sales despite an economic downturn that made investors anticipate stronger sales. Last year, consumers bought discounted frozen meals instead of soup.
(Reporting by Martinne Geller, editing by Dave Zimmerman)
