Campbell's profit slips amid sluggish soup sales

CAMDEN, N.J. (AP) ? Campbell Soup Co.'s net income slipped by 5 percent in the latest quarter as it struggled to balance higher costs for ingredients and sluggish soups sales, the company said Monday.

The Camden, N.J.-based company, which is known for its red and white soup cans, is trying to regain lost ground after years of declining soup sales. The efforts include plans to roll out pricier, higher-quality soups and more snacks and beverages.

Even as it tries to win back consumers, however, the company has had to raise prices to offset higher commodity costs, and volumes are continuing to slip in key categories.

For the three months ended April 29, Campbell said it earned $177 million, or 55 cents per share. That compares with a net income of $187 million, or 57 cents per share, in the same quarter last year.

Excluding one-time items such as restructuring costs, the company earned 56 cents per share. By that measure, analysts polled by FactSet expected 52 cents per share on average.

The company said its gross profit margin fell to 38.8 percent, from 40.4 percent, as a result of higher costs for ingredients and increased spending on promotions. The company is stepping up its marketing spending to boost sales.

Sales of U.S. soups declined 3 percent from a year ago, as a result of declines in Campbell's condensed soups, ready-to-serve soups and broths. Sales of its Prego pasta sauce rose 3 percent, as increased advertising for new flavors drove up volumes.

The baked goods and snacks and beverage units saw gains as well. The global baked goods and snacks unit saw a 3 percent increase in sales to $543 million, driven by higher prices for its Pepperidge Farm products. Goldfish snack crackers saw double-digit increases. Still, operating earnings for the broader baking and snacking segment fell to $73 million from $82 million a year ago, as a result of higher commodity costs and promotional spending.

Sales in the U.S. beverages unit increased 5 percent, driven by gains in V8 vegetable juice. Sales of international meals and beverages fell 1 percent, as promotional spending and currency exchange rates offset price hikes.

Despite an improvement in overall sales trends, CEO Denise Morrison noted that the company is "not satisfied with our performance this quarter."

"We executed well in some businesses, delivering solid sales growth in U.S. Beverages, Pepperidge Farm and Canada," she said. "We did not execute as well in others."

Campbell stood by its 2012 guidance of adjusted earnings per share in the range of $2.35 to $2.42, down from the $2.54 last year.

Shares of Campbell fell 1 cent to $33.39 in premarket trading.

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