Campbell Soup, the world's largest soup maker, reported quarterly revenue that fell short of analyst expectations as sales growth in its core U.S. soup business slowed, sending its shares down 3 percent.
Under a turnaround effort led by Chief Executive Officer Denise Morrison, the company has been revamping its offerings with new varieties of soups and sauces, and improved advertising as it looks to reverse several seasons of weak soup sales.
While these actions have helped sales for the past few quarters, the company warned that the new launches and marketing would pressure profit growth in the current quarter. Growth in its U.S. soups business eased to 4 percent in the fourth quarter, from the 9 percent it clocked a year earlier and the 14 percent last quarter.
Campbell (CPB), which also sells Prego pasta sauces and Pepperidge Farm cookies, is trying to move away from its traditional soup business and into fast-moving perishable goods.
"We expect soup to account for about one-third of our sales [in fiscal 2014] versus more than 40 percent in fiscal 2012," Morrison said on a conference call after the company reported a better-than-expected profit for the quarter ended July 28.
Morningstar (MORN) analyst Erin Lash said she was impressed with the growth in the soup business in the quarter which came during the summer and against tough comparisons. She has a "hold" rating on the company's stock.
During the past year, Campbell has bought Bolthouse Farms, which makes refrigerated salad dressings and baby carrots; Plum Organics, which makes baby food; and cookie maker Kelsen as it looks to grow its fast-moving perishable goods business.
Though quarterly sales rose 13 percent to $1.82 billion helped by such deals, it fell short of analysts' estimates of $1.84 billion, according to Thomson Reuters I/B/E/S. The shortfall was also due to weak U.S. drinks business which fell for the fourth straight quarter as its V8 vegetable juice faced stiff competition from energy drinks and packaged fresh juices.
The Camden, N.J.-based company has earmarked some European businesses for sale and excluding these operations, total sales were $1.72 billion in the quarter. Campbell said it expects sales on this basis to grow 5 to 6 percent in fiscal 2014. Adjusted earnings are expected to grow 3 to 5 percent.
Fourth-quarter adjusted earnings rose 9 percent to $142 million, or 45 cents a share, beating analyst estimates of 42 cents a share.
The company's shares were down 2.7 percent at $43.47 in afternoon trade on the New York Stock Exchange on Thursday.