"No Soup for You!" Campbell Misses on Revenue but Saves on Cut in Soup Advertisement

On Tuesday morning, noted soup company Campbell Soup (NYSE: CPB) reported a drop in its first quarter profit. Campbell Soup's quarterly profit fell to $265 million, or $0.82 per share, from $279 million, or $0.82 per share, in the prior year period. However, Campbell beat the analyst estimates of $0.79 per share, but missed on revenues, reporting $2.16 billion versus the $2.21 billion estimate.

Campbell Soup confirmed 2012 financial guidance stating it expects net sales growth to be between 0% and 2%, a decline in adjusted EBIT of between 9% and 7%, and a decline in adjusted EPS of between 7% and 5%, or $2.35 to $2.42 per share, from the adjusted base of $2.54. This compares to analyst estimates of $2.37 per share.

Denise Morrison, Campbell's President and CEO, said in response to this quarter's earnings, “As we've previously stated, fiscal 2012 will be a year of investment as we establish the foundation for the next era of profitable growth at Campbell.

Campbell saved money as the company cut its marketing and selling expenses, which decreased 6% to $261 million compared with $277 million in the prior year. The reason was due to lower advertising and consumer promotion expenses, particularly in the U.S. Soup business, which was offset by the impact of currency. The U.S. Soup advertising began late in the quarter to be more closely aligned with the start of the soup season, according to the company's release.

However, even with the savings, overall sales were down 1% for the first quarter. Volume and mix of products decreased sales by 5% and the recent price increases in addition to sales allowances added 4%. Offsetting each other, increased spending in advertisements subtracted 1% and currency translation added 1%.

One of the areas where sales hurt the most was in the U.S. Beverage and Snacking division. Sales for U.S. Beverages were $198 million for the first quarter, a decrease of 3% compared to the prior year period. However, volume and mix added a positive 1% change to U.S. Beverage sales, but lost 4% in increased promotional spending.

CEO Morrison continued and explained, “In U.S. Beverages, we faced increased inflation, a weaker category and intensified competition, with new entrants in both 100-percent vegetable juice and fruit and vegetable blends. We stepped up our advertising near the end of October, when our new ‘V8'campaign began airing. Although our consumption growth outpaced the category and our market share increased, this required significant investment to protect our business."

Obviously investors were disappointed in Campbell Soup's first quarter as share of the company have been falling since the opening bell. At the time of posting, shares of Campbell are trading down over 2 points or -6.37% at $31.47.

Campbell Soup engages in the manufacture and marketing of branded convenience food products worldwide.

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