The Wall Street Journal -- September 3, 1999
Marketing & Media:
Campbell Soup's
Profit Sags 57%,
Missing Estimates
----
By Shelly Branch
Staff Reporter of The Wall Street Journal
CAMDEN, N.J. -- Despite attempts to reheat sales with increased promotional spending, Campbell Soup Co. reported disappointing fiscal fourth-quarter results.
For the quarter ended Aug. 1, the food company said net income fell 57% to $79 million, or 18 cents a diluted share, from $182 million, or 40 cents a diluted share a year ago. The company said the results include 10-cents-a-share costs in restructuring expenses and nonreccuring items.
Excluding those special items, Campbell remained a penny below analysts' expectations as compiled by First Call/Thomson Financial. Those forecasts had already been lowered after the company's warnings in June.
In a conference call, some analysts said they were skeptical about expenses related to researching acquisition candidates being classified by the company as nonrecurring and not a normal part of doing business.
Asked about analysts' concerns regarding the one-time items, a Campbell spokesman said: "Our view is that these are one-time, nonrecurring events."
In New York Stock Exchange trading, Campbell fell 68.75 cents to $43.5625.
Sales, which declined slightly to $1.296 billion from $1.299 billion, were aided in part by Campbell's nonsoup brands such as Pepperidge Farm and Godiva chocolates.
While other packaged-food companies are battling weak sales and pressure from consoldating retailers, Campbell's sustained problems are among the industry's worst. "Fiscal 1999 has been a difficult year of transition," conceded Dale F. Morrison, president and chief executive.
But "the year was even weaker than the numbers showed," said Nomi Ghez, an analyst with Goldman Sachs & Co. She noted that U.S. shipments of canned soup, which account for 51% of earnings, were down 2% in the quarter.
While that's better than the double-digit decline analysts were expecting, it came at a cost. To achieve it, analysts said, Campbell had to revert to an inventory practice that encouraged retailers to stock up before a July price increase. The company achieves higher volumes but some retailers could again be stuck with bloated inventories and even reduce subsequent orders from Campbell.
Another disappointment: International soup shipments -- an area that Campbell had cited as particularly promising -- were noodle-flat for the quarter and the year, excluding acquisitions.
Despite the quarter's performance, Campbell remains upbeat about the appetite for soup in the U.S. The company notes that consumption is up 2% for the second year in a row, and it is testing what it calls several new "promising" varieties, such as "ready-to-serve" soups in resealable plastic containers and "Campbell's Plus," a line of soups fortified with vitamins, calcium and minerals.
Analysts are looking for a different recipe for growth. "They've got to get out of the can, with more contemporary products," said John McMillin, an analyst with Prudential Securities in New York.
interactive.wsj.com |
