The 3.4 percent decline in net income reported Monday by the world's largest soup maker represented a reversal of a recent trend in which Campbell managed to increase net income by cutting expenses in quarters when sales have been down or just barely higher.
CEO Douglas R. Conant said Campbell's sauces, condensed soups and other products used to prepare meals at home are resonating with consumers. He says that even though there are signs that the economy is improving, data shows that shoppers are making fewer trips to grocery stores and are highly price conscious when they're there.
The improved sales also followed a year-ago quarter when sales fell sharply. Campbell used heavy promotions - coupons and special pricing - to drive sales.
Conant said the company expects adjusted earnings per share for the entire fiscal year to be at the high end of its previous outlook of 9 to 11 percent growth.
"The beauty of Campbell Soup is they're in control of their own destiny," said Jonathan Feeney, an analyst who follows Campbell for Janney Montgomery Scott. Though store soup brands have made gains, Campbell is so big that it drives the whole soup category.
Its shares slipped 8 cents to $35.40 in midday trading.
The Camden, N.J., company reported net income fell to $168 million, or 49 cents per share, in the three months ended May 2, down from $174 million, or 49 cents a share, a year ago.
Excluding one-time costs that included $12 million for restructuring and $10 million in deferred tax payments related to the health insurance reforms, the company said its adjusted earnings came to 54 cents a share. That beat the 51 cents that Wall Street analysts surveyed by Thomson Reuters expected.
Overall revenue increased 6.9 percent to $1.8 billion from $1.69 billion a year ago as U.S. soup revenue rose 2 percent. Overall revenue was in line with analysts' expectations.
Revenue from condensed soups - the products that made the company famous more than a century ago and are still important because of their high profit margins - declined 1 percent as higher promotional spending more than offset gains in volume sold.
Ready-to-serve soup revenue increased 4 percent. The company did not release precise figures, but said that its Chunky soup sales were strong. That means the products rebounded from the second quarter, when company officials said they made mistakes with the way they promoted a relaunched line of healthier Chunky soups.
Promotional spending on the male-oriented Chunky and the female-targeted Select Harvest line of ready-to-serve soups was up.
For the first nine months of the fiscal year, the company reported net income of $731 million, or $2.09 per share, on sales of $6.16 billion. That is up from net income of $667 million, or $1.83 a share, on sales of $6.06 billion a year earlier.
