Campbell reports Q4 profit rise on better margins

By GEOFF MULVIHILL

HADDONFIELD, N.J.

During a summer of record-breaking heat through much of the U.S., the Campbell Soup Co. struggled to sell its cold weather-friendly soups, but got another boost from broth, a staple for home cooks.

The company on Friday reported that its fourth-quarter net income rose 63 percent to $113 million, or 33 cents per share over the same period last year. Excluding one-time items from 2009, including a charge for nontangible assets, profit rose 7 percent.

The higher profit was due largely to productivity improvements, a share buyback program and lower taxes as sales of $1.52 billion were down 1 percent.

Sales of both ready-to-serve and condensed soups were down by 7 percent for the quarter.

But broth sales rose 9 percent as the company continues to promote quick, affordable meals -- including homemade soups -- that can be made with its broths.

In trading Friday morning, Campbell's stock slid $1.32 to $36.

Chief Financial Officer Craig Owens said the company's research shows shoppers are sticking closely to their lists, looking for bargains and not doing much stocking up.

He said that's hurting the entire soup category, which saw its sales down by 4.7 percent in the past fiscal year. Campbell did slightly worse than that, with soup sales down a bit over 5 percent overall. It was the company's first decline in soup sales after seven straight years of growth.

Campbell's expensive ready-to-serve lines like Chunky Soup were hit hardest, with sales down 9 percent for the year.

The company is less concerned with its fourth-quarter numbers, saying that its sales for the period don't speak much to the health of the company because of the relatively small sample size. And this quarter may have been hurt by grocery stores deciding to keep their soup inventories down until a new marketing campaign launches next week, company officials said.

Campbell President and CEO Douglas Conant reiterated on a conference call with analysts Friday that the company is making it a priority to improve condensed soup sales in the new fiscal year and to have a more stable plan to promote its ready-to-serve soups.

Conant said sales growth would have to come mostly through selling more soup -- not by raising prices.

"I see that consumers remain very value conscience and the competition in our industry will remain very intense," he said.

That's why the company expects sales growth for fiscal 2011 of 2 to 3 percent -- just below it's long-term target. The company remains more bullish, though, about its ability to cut its costs. It projects per-share profit to rise 5 percent to 7 percent for the year.

One analyst said all that points to lower prices for soup buyers ahead.

"Campbell is setting up for a discounting spree and, if it works, we think the stock will" rise, Jonathan Feeney, an analyst with Janney, wrote in a note Friday about the company's performance.

The company was helped in the quarter, and through the fiscal year, but more stable prices for its ingredients and other supplies. In fiscal 2009, inflation for inputs was a major issue for the company.

Bright spots included sales of beverages, including V8 vegetable juices, which were up 12 percent. The company plans to roll out next month a vegetable-based juice that also includes tea.

For the full fiscal year, Campbell, based in Camden, N.J. reported net income of $844 million or $2.42 per share, up from $736 million or $2.05 per share in fiscal 2009. Excluding one-time items, the full-year earnings were $862 million, or $2.47 per share, up from $794 million or $2.21 per share.

Full-year revenue was $7.7 billion, up 1 percent from the prior year.