NEW YORK ― Campbell Soup Co. reported higher-than-expected quarterly results on Friday, helped by fewer profit-sapping promotions in its long-struggling U.S. soup business.
To turn around the unit’s performance, Campbell put more money into advertising instead of promotional discounts. The strategy boosted earnings but led to a 9 percent decline in U.S. soup sales as some customers apparently switched to cheaper brands.
Fiscal 2012, which began on Aug. 1, will be “a year of transition,” said Chief Executive Denise Morrison, who has been in the top job for just over a month.
The world’s top soup maker said fiscal-year sales would be unchanged to up 2 percent, with earnings before special items declining 5 to 7 percent. In July it forecast a 4 to 6 percent earnings decline.
Campbell executives said the new earnings forecast had more to do with fiscal 2011 earnings being higher than expected than with any anticipated change in performance.
Campbell shares were down 24 cents, or 0.75 percent, at $31.62 in midday trade on the New York Stock Exchange.
Morrison, who succeeded longtime CEO Douglas Conant, has already set plans for Campbell to exit its business in Russia, cut hundreds of jobs, and put sodium back in 31 Select Harvest varieties of soup based on consumer feedback.
The company has “more work to do,” Morrison said in a statement.
Morningstar analyst Erin Lash said she was encouraged that the company is investing in marketing and product innovation.
“Obviously, it will take some time for those investments to yield measurable improvements, but we think they’re steps in the right direction,” Lash said.
Morrison said Campbell expects soup volumes to decline for the next two quarters as the company continues to cycle deep discounts that spurred sales in the year-earlier periods.
But consumers will get used to this year’s higher prices over time, she said.
Fewer promotions effectively raises the price of items on the grocery shelf. Campbell also put through actual price increases to offset higher commodity costs.
Campbell said net income fell to $100 million, or 31 cents per share, in its fiscal fourth quarter from $113 million, or 33 cents per share, a year earlier.
Excluding restructuring charges, earnings increased 30 percent to 43 cents a share. Analysts on average expected 38 cents, according to Thomson Reuters I/B/E/S.
Sales rose 6 percent to nearly $1.61 billion, beating analysts’ expectations for $1.57 billion.