UPDATE 4-Campbell profit tops view, but outlook weighs

* EPS $0.54 ex-items vs Wall Street view of $0.51

* Q3 sales $1.80 billion match Street estimates

* U.S. soup sales up 2 pct

* Sees ’10 EPS at high end of forecast

* Shares down 0.3 pct
(Revises first sentence, adds company comments, updates share
price)

By Martinne Geller

NEW YORK, May 24 (BestGrowthStock) – Campbell Soup Co (CPB.N: )
posted a higher-than-expected quarterly profit as U.S. soup
sales rose for the first time in three quarters, but the gain
was fueled by increased promotions the company expects to
continue.

Despite beating earnings expectations, shares of the
world’s largest soup maker edged lower on Monday as the company
also left intact a full-year forecast that indicated the fourth
quarter might disappoint some analysts.

For the full year, Campbell said it expected sales to
increase 2.5 to 3.5 percent, with adjusted earnings per share
growth at the high end of its 9 to 11 percent forecast.

The current fourth quarter will likely include higher sales
and some expenses related to a relaunch of Campbell’s condensed
soups, the company said. The fourth quarter is typically the
least important as people eat less soup in warmer weather.

U.S. soup sales rose 2 percent in Campbell’s third quarter,
ended on May 2, after falling in the first and second quarters.
The company said it stepped up spending on promotions, offering
retailers special lower prices and increasing the frequency of
those promotions.

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Graphic on soup sales and consumer sentiment

http://link.reuters.com/buk95k

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In the weakened economy Campbell has been battling growth
from lower-priced private-label soup competitors and companies
that make other simple meals like frozen foods.

“Our main take-aways are that volume results this quarter
are encouraging but that we still have work to do,” said
Campbell Chief Executive Doug Conant.

Moving forward, Conant said the company plans to “compete
vigorously” with other branded and private label soup makers,
and “at a level that the competition would find challenging”.

In the 52 weeks through April 18, Campbell said it had a
63.4 percent share of the U.S. soup market.

Private label’s share grew to 12 percent, with sales by
that segment up 6.7 percent while Campbell’s fell 3.6 percent.

PROMOTIONS DRIVE SALES GAIN

Third-quarter profit (Read more your timing to make a profit.) dipped to $168 million, or 49 cents a
share, from $174 million, or 49 cents a share, a year earlier.

Excluding one-time items, earnings were 54 cents a share,
topping the analysts’ average estimate of 51 cents, according
to Thomson Reuters I/B/E/S.

Sales rose 6.9 percent to $1.80 billion, in line with the
analysts’ average estimate, as results benefited from a 5
percentage-point lift from currency exchange rates.

The company, which also makes V8 juices and Pepperidge Farm
cookies, said higher sales volume and a greater proportion of
higher-priced items had boosted sales by 4 percentage points.
Increased spending on promotions subtracted 3 percentage
points.

Even as the economic downturn has led consumers to eat more
meals at home, Campbell saw U.S. soup sales fall in its first
and second quarters as shoppers sought out other “simple meals”
like frozen foods.

But in the latest quarter, sales in the key U.S. soup
segment rose as a 5 percent volume gain offset the increased
promotions.

Sales of Campbell’s condensed soups fell 1 percent as the
promotions more than offset volume gains. Sales of
ready-to-serve soups rose 4 percent, an improvement from the
first half of the fiscal year, on strong volume gains for
Chunky and Select Harvest canned products. Broth sales
increased 9 percent.

Sales in Campbell’s beverage segment rose 13 percent,
driven by increases of its V8 V-Fusion juices and Prego pasta
sauces.

Improved sales of broth and pasta sauce are signs that
consumers are still cooking at home as they try to save money
in a sluggish economy.

“It was a decent quarter, but they’re still facing a
challenging environment,” said Morningstar analyst Erin
Swanson, citing soft consumer spending and potential headwinds
later this year from foreign exchange rates and higher
commodity costs.

Yet if commodity costs increase over the next few quarters,
the company might have to pull back on its promotional
spending, she said.

“Consumers have grown accustomed to buying on promotion,”
Swanson said. “If promotional spending is ratcheted back, how
do volumes respond?”

Campbell shares were down 10 cents, or 0.3 percent, at
$35.38 on the New York Stock Exchange around midday.

stock market

(Additional reporting by Brad Dorfman in Chicago; Editing by
Lisa Von Ahn and Matthew Lewis)

UPDATE 4-Campbell profit tops view, but outlook weighs