Campbell Soup Co. said Tuesday that its first quarter net income fell 5 percent as the company worked to turn around its soup business in the U.S. and expand internationally.
Profit was better than expected, mainly due to lower spending on advertising and fewer shares outstanding. But revenue missed expectations as volume declined due to higher prices. The company, like other food makers, has raised prices to offset higher costs for ingredients and other materials.
Shares fell over 5 percent Tuesday.
"Consumers continued to be impacted by the challenges in the global economy," during the quarter, said CEO Denise Morrison during a call with analysts. "There's little doubt that the pronounced caution and restraint that have characterized consumer behavior since the onset of the financial crisis are now the `new norm' for the food and beverage sector."
The Camden, N.J.,-based company is trying to regain lost ground after several years of declining soup sales. U.S. soup sales fell 4 percent during the quarter as higher prices hurt volume. Shoppers have curbed their soup consumption, stopped stocking pantries or shifted to competitor's brands. Campbell is in the early stages of a turnaround plan that includes adding high-end soups and broadening offerings in its snack, beverage and other categories.
The company lowered prices on soup last year in promotions, causing tough comparisons for this year. Campbell Soup also cut its advertising spending, shifting ad dollars to later in the quarter to more closely correspond with soup season.
Despite higher prices, Morrison said the sales decline was not as pronounced as expected, helping profitability. Morrison said Campbell is aiming to stabilize the soup division's profitability and will then try to drive revenue growth.
Sales were weak in other categories as well. U.S. beverages sales slipped 3 percent as the company's V8 brand was hurt by higher prices for juice concentrate and packaging and increased competition in the vegetable juice sector.
Sales volumes dropped for the Australian Arnott's biscuit brand, and sales of the soup, sauce and beverage division declined in Europe.
A bright spot was Goldfish crackers and Pepperidge Farm's Milano Melts and new Cracker Chips, which sold well. Sales in the global baking and snacking unit rose 4 percent to $568 million.
Overall, net income fell to $265 million, or 82 cents per share, in the quarter ended Oct. 30, from net income of $279 million, or 82 cents per share, in the same period last year.
There were about 5 percent fewer shares outstanding at quarter's end than a year ago, which helps boost earnings per share.
Analysts polled by FactSet expected 79 cents per share.
Revenue fell less than 1 percent to $2.16 billion from $2.17 billion. Analysts expected revenue of $2.21 billion.
Campbell affirmed its guidance for fiscal 2012. It expects revenue to be flat to up 2 percent, which translates to revenue of $7.72 billion to about $7.87 billion. It predicted adjusted earnings of $2.35 to $2.42 per share.
Analysts expect net income of $2.38 per share on revenue of $7.83 billion.
Shares fell $1.77, or 5.27 percent, to close at $31.84 Tuesday. When adjusted for dividends, the stock price was almost unchanged this year through Monday's close.