Price-conscious grocery shoppers are being choosy about what they buy to cook at home, even from the value-oriented Campbell Soup Co.
The company reported Monday that its first quarter profit rose 17 percent with the help of lower costs from increased efficiency in getting its products from its plants to store shelves, as well as lower prices for grain ingredients.
But revenue fell 2.1 percent to $2.2 billion with dips in sales for most of its categories, ranging from condensed soup to Prego pasta sauce.
Earnings were $304 million, or 87 cents per share, in the first quarter, up from $260 million, or 70 cents per share, a year ago. But the company says the year-ago profit figure included one-time charges, including some related to closing facilities in Australia and Canada and restructuring management, that made it look worse than it was. Excluding the year-ago charges, adjusted earnings per share was 76 cents.
The higher profit is another sign that the inflation that socked ingredient and packaging prices last year is over. The company said that lower grain prices have more than offset inflation for tin and tomato paste.
The Camden-based company also raised its guidance for the rest of the fiscal year.
But with sales down slightly, none of the good news seemed to excite investors much.
The company's shares rose 23 cents to $34.35 in midday trading.
Soup sales fall after strong first quarter
Jack Russo, who follows the company for Edward Jones, called the Campbell report "the same old song-and-dance" that firms that sell food and other staples have reported in the past few months. "The favorability on costs and that sort of thing sort of drove the quarter," he said.
The company says part of the reason for the sales drop is that the first quarter a year ago was strong. For instance, soup sales in the earlier period rose 12 percent. They dropped 3 percent in the most recent quarter.
Another reason for lower sales is that the company rolled out its major soup marketing campaigns mostly in October this year — two months later than last year, when Campbell tried to get a jump on selling a lineup of new products.
Campbell CEO and President Douglas Conant told analysts on a conference call Monday that soup sales in October were up 10 percent over the same month last year — a sign that the strategy is working.
Campbell also said its relaunched Chunky soup brand, still aimed at men but with more lean meat and vegetables, is off to a promising start.
CEO: Condensed soup positioned well
The company said sales of some of its relatively expensive products — V-8 juice and soup in microwavable bowls — continued to suffer as shoppers seemed to stay away from products they don't see as necessary.
Conant said that's why condensed soup — which can be priced at under $1 per can when it's on sale — should do fine as the recession lingers.
He also said the company can sell its soup in microwavable packages for their value rather than their convenience.
"We think there's a big marketing opportunity with microwavable to market it as the ultimate brown-bag lunch," he said.
One area where Campbell is doing especially well, Conant said, is in traffic to its Campbell's Kitchen Web site, which offers recipes — using soup, of course — that can be made in 30 minutes or less and for under $10. Conant said traffic was twice as high this quarter as it was a year ago.
Campbell also said Monday that it was raising its guidance for the current fiscal year, saying it expects its earnings per share to rise by 9 to 11 percent through the end of July, up from its long-term target of 5 to 7 percent.
Investors have not been blown away by the improved outlook, perhaps because it reflects mostly better currency exchange rates and doesn't signal the company selling much more soup — or anything else.