Y2k fear bolstered sale of soups

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Y2K fear bolstered sales of soups Customers flocked to stores to stock up on Campbell's soups. Second-quarter profits jumped 28 percent.

By Rosland Briggs-Gammon

INQUIRER STAFF WRITER As worried shoppers cleared store shelves of canned goods in December in anticipation of possible Year 2000 disasters, they helped boost Campbell Soup Co.'s profits beyond analysts' expectations.

The Camden soup-maker said yesterday that its fiscal second-quarter profit increased 28 percent, in part because panic buying drove up soup shipments 12 percent. It was the company's first increase in soup shipments in five quarters.

For the fiscal quarter ended Jan. 30, Campbell reported net income of $281 million, or 65 cents a share, compared with $219 million, or 49 cents a share, a year earlier. Sales rose to $1.92 billion from $1.83 billion during the period.

Campbell had been expected to earn 62 cents a share, according to a consensus estimate of analysts polled by First Call/Thomson Financial, an investment-research firm.

About one cent to two cents of the earnings surprise came from a lower-than-expected tax rate of 33.6 percent, analysts said. Andrew Lazar, an analyst at Lehman Bros., had forecast a rate of 35.5 percent.

"Earnings have rebounded strongly, led by the recovery of U.S. soup volumes and continued margin improvements," Dale F. Morrison, Campbell's president and chief executive officer, said in a statement. "New products rolled out this fiscal year are gaining strong consumer acceptance."

During the fiscal quarter, the company introduced ready-to-serve tomato soup and a line of soups in single-serve microwaveable bowls. It also created on-the-go meals that include several of its products in one package.

Soup and sauce shipments in the United States rose to $1.4 billion from $1.28 billion in the year-ago fiscal quarter. Sales had fallen in the 1999 quarter after Campbell stopped offering discounts on its soups at the end of each quarter. Outside the United States, soup sales in the latest quarter rose 1 percent, led by gains in France, Germany and Australia.

The company's shipments became the subject of several lawsuits earlier this year that alleged Campbell had inflated its sales. Campbell denied those allegations yesterday.

"Campbell Soup Co. does not make and has not made sham shipments of products. The sales we record are based on real sales," Basil Anderson, chief financial officer, said during a conference call with analysts yesterday. "The claims are baseless, and we will defend ourselves vigorously."

While the company increased the number of cases it shipped during the fiscal quarter, consumer purchases on the retail side fell 2 percent, Campbell said. Much of the consumption decline was due to 5 percent lower sales of Campbell's red-and-white-label condensed soups during the period.

"The issue of how to grow the red-and-white is complicated. We can't compete with the private labels on price," Anderson said.

"One thing we haven't done enough yet is our innovation in the marketplace. That is the most fundamental thing we can do. We have a long way to go in terms of what the red-and-white label can deliver."

Campbell's delay in spending on advertising until the third quarter also contributed to its higher earnings. Some analysts said they were surprised that Campbell would reduce marketing spending for soups during part of its peak selling season.

In New York Stock Exchange trading yesterday, shares of Campbell closed at $27.44, unchanged. The stock has fallen about 29 percent this year, making it the worst performer in the Standard & Poor's food stock index, which has declined 17 percent.


-- Martin Thompson (mthom1927@aol.com), February 17, 2000

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