Campbell Soup Co. reported a 8 percent fall in its first quarter profit as it spent heavily to market its products and it expects margin pressures to persist through the second quarter.
The world's largest soup maker said its quarterly results were negatively affected by lower sales of its high-margin ready-to-serve and condensed eating soups, where higher spending did not produce the planned volume gains.
This was partly due to even steeper promotions by competitors, it said.
“In a challenging consumer spending environment, we delivered mixed results in our U.S. Soup business this quarter. We intend to remain competitive in U.S. Soup through the height of the soup season, and it’s likely that margin pressures will persist through the second quarter, chief executive Douglas Conant said.
For the quarter ended Oct. 31, the company posted net profit of $279 million or 82 cents a share, compared with $304 million or 87 cents a share a year earlier.
Net sales fell to $2.17 billion from $2.2 billion. Gross margin was 41.2 percent, compared with 41.9 percent a year ago.
On average, analysts polled by Thomson Reuters expected the company to earn 83 cents a share on sales of $2.2 billion.
Segment wise, sales for the company's U.S. Soup, Sauces and Beverages fell 3 percent. U.S. Soup sales decreased 5 percent as sales of ready-to-serve soups went down 13 percent due to higher promotional spending.
Sales for International Soup, Sauces and Beverages fell 1 percent, while sales at Baking and Snacking segment rose 3 percent. The company's Baking and Snacking includes the following businesses: “Pepperidge Farm” cookies, crackers, breads and frozen products in U.S. retail and “Arnott’s” biscuits in Australia and Asia Pacific.
For fiscal 2011, Campbell, which recently lowered its full-year expectations, still expects net sales growth of 1 percent to 3 percent and earnings per share growth of 2 percent to 4 percent from the fiscal 2010 adjusted base of $2.47.
Shares of the Camden, N.J.-based company closed Monday's regular trading session at $34.83 on the NYSE.