Campbell Soup Co's U.S. soup sales fell 8 percent during the usually strong late fall and winter months, raising analyst concerns about whether it will meet a lowered sales goal for the year.

The world's largest soup maker has seen a sharp decline in sales of its ready-to-serve soups as consumers find better deals in other types of prepared foods.

It also reported flat sales in lower-priced condensed soup, showing that they have been unable to entice consumers as the worst of the recession wanes.

The company's shares were down 29 cents.

Campbell last week cut its 2010 sales forecast to predict an increase of 2.5 percent to 3 percent and said it would overhaul the packaging and marketing of condensed soup, its single-biggest product.

But some analysts doubted whether Campbell could attain the lowered growth level.

This lowered sales guidance still seems a bit lofty after this quarter's weakness, J.P. Morgan analyst Terry Bivens said in a research note.

While packaged-food companies have benefited as people eat at home more often, Campbell's said it is facing more competition over the items making it into shopping carts.

Earnings for the second quarter that ended January 31, rose to $259 million, or 74 cents share, from $233 million, or 64 cents a share, a year earlier. Analysts on average forecast 74 cents a share, according to Reuters Estimates.

Sales rose 1 percent to $2.15 billion, falling short of a Wall Street forecast of $2.23 billion.

Gross margin rose to 40.5 percent from 39.4 percent a year earlier, helped by improved productivity.


Campbell said sales of ready-to-serve soups fell 18 percent during the quarter, while it spent less to promote ready-to-serves and saw intense competition in the simple meals category, such as frozen dinners.

Rival Progresso, which is owned by General Mills , has also seen some pressure on ready-to-serve soup as consumers choose not to pay more for the convenience.

Campbell CEO Douglas Conant said the company has plans to improve the performance in the ready-to-serve segment in the second half of the fiscal year.

Sales of its lower-priced condensed soup, which are packaged in the well-known red and white can, were flat during the quarter.

Campbell's said it had some evidence that shoppers may have bought condensed soup more as an ingredient for other recipes rather than to eat on its own. Soups such as Cream of Celery and French Onion, used in casseroles and other dishes, were better sellers in the category and the company noted recipes using cooking soups being downloaded from its website.

Despite the lowered sales view, Campbell stood by its 2010 earnings forecast of a 9 percent to 11 percent increase, including one-time items. Conant also said last week that Campbell was in a position to raise its long-term earnings targets in the next year or so.

Beverage sales fell slightly due to lower sales of V8 juice. Prego pasta sauce sales rose sharply, while Pace Mexican sauce sales fell, the company said. Baking and snacking sales rose 11 percent to $489 million, aided by higher sales of Pepperidge Farm Goldfish crackers.

Campbell's shares were down 29 cents, or 0.85 percent. at $33.64 in morning New York Stock Exchange trading.

(Reporting by Brad Dorfman; Editing by Lisa Von Ahn and Maureen Bavdek)