Where have all the soup slurpers gone?
Shares in Campbell Soup fell 2 per cent on Friday after the company delivered weaker-than-expected quarterly results and warned that full year sales could turn negative.
The company, best known for its eponymous line of canned condensed soups, said it now expects sales for the fiscal 2017 year ending in July to remain flat or drop as much as 1 per cent as it continues to do battle with changing consumer tastes and weak consumer spending growth.
It had previously predicted sales to rise by as much as 1 per cent.
The gloomier outlook comes as Campbell suffered a 1 per cent drop in organic and total sales in the three months to end of April. Sales dropped to $1.85bn during its fiscal third quarter as aggressive discounting compounded the lacklustre sales trend. The market had forecast revenue to hold steady at around $1.874bn.
“This was a challenging quarter across the food industry as top-line growth remained scarce, especially in center store categories,” said Denise Morrison, president and chief executive.
“The industry, including Campbell, experienced significant consumption declines early in the calendar year. These industry trends coincided with weak consumer spending, which was at its lowest growth rate since 2009. While we rebounded with sales growth in March and April, we were unable to offset the earlier declines.”
Net income fell nearly 5 per cent during the quarter to $176m, or 58 cents per share, from the period last year.
Revenue in its simple meals and beverages division, which includes its iconic canned tomato soup, dropped 2 per cent in during the quarter. And while the company has sought to combat the consumer shift away from pre-packaged and processed foods with it own lines of fresh juice and soups, the unit – dubbed Campbell Fresh – has continued to disappoint. Net sales fell 6 per cent, partially due to capacity constraints and continued carrot supply issues.
Those segment declines, however, were partially offset with a 2 per cent sales gain in its snacking division, a continued bright spot at the company, driven by strong sales by Pepperidge Farm and Arnott’s biscuits.
The company did raise the lower end of its earnings guidance however. Adjusted earnings per share are expected to increase by 3 to 5 per cent, compared to its previous forecast for a 2 to 5 per cent increase.