Campbell Soup Co. today (18 February) booked a fall in first-half sales and earnings, which were hit by high levels of promotional spending and pricing investments.
The US soup giant saw net earnings for the six months to 30 January fall to US$518m, or $1.53 per share, compared with $563m, or $1.61 per share, a year earlier. EBIT fell 8% to $803m, while net sales were down 1% to $4.29bn. The fall in sales and earnings forced Campbell to cut its targets for annual sales and profits.
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Speaking to analysts, Campbell president and CEO Doug Conant said that the company had followed a strategy of deep discounting to drive US soup sales. However, Conant said the price cuts failed to drive sufficient volumes, meaning any gains in volume were wiped out by lower pricing.
As a consequence, US soup sales were “disappointing”, with revenues from ready-to-serve soups down 4% and condensed soup sales falling 7%.
Nevertheless, Conant insisted that the second-quarter sales data was not all bad news. The company had succeeded in “getting volume growing again” over the past three months, responding to the need to protect the group’s consumer base in the face of increased competition from rivals in the simple meals category, he suggested.
“The overall competitive environment remains challenging throughout the food industry, particularly in the US,” Conant said. “Three of our four segments are growing earnings. We have an issue here in the US and we are on it. We can and will do better.”
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By GlobalDataMoving into the back half of the year, Campbell management revealed that the company is switching its promotional focus from pricing to advertising.
Campbell recently launched its first-ever umbrella advertising campaign, and Conant said that the consumer response had been “really positive”.
Conant said last year that he will step down as CEO at the end of July. He will be succeeded by operations chief Denise Morrison.
“Our performance as a result of the heavy price discounting that we engaged in did not give us the lift we expected. Our volumes did not increase enough to give us enough additional sales to lift profits. We are not happy about that,” Morrison said.
However, she added: “We believe we can do better in the soup business.”
Campbell shares were down 4.6% at $33.34 at 12:39 ET.
