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Campbell Soup's profit dips as company repositions

NEW YORK (AP) -- Campbell Soup's net income dipped 8 percent in the first quarter, as the world's biggest soup maker booked charges related to closing its oldest U.S. plant and a push into the faster-growing premium juice market.

The company, which also makes Pepperidge Farm baked goods and V8 vegetable juices, on Tuesday cited the moves to reposition its business for the decline in its quarterly profit. But it noted that its flagship U.S. soup business saw a promising sales bump, helped by a new lineup of soups and sauces intended to resonate with younger consumers.

Campbell Soup Co., based in Camden, N.J., has struggled in recent years amid intensifying competition and declining consumption of canned soups. CEO Denise Morrison, who was hired about a year ago, has been working to revitalize the company's main business with new flavors and packaging designed to appeal to people in their 20s and 30s. Instead of the company's iconic steel cans, for example, the newest soups come in plastic pouches that can be torn open and microwaved.

The company said these "Campbell's Go" soups helped lift U.S. soup sales by 2 percent in the quarter, marking the second straight quarter of growth.

In a conference call with analysts, Morrison said that the new soups have created "somewhat of a buzz about soup in general" but that the company wasn't "breaking out the champagne yet."

The sales increase was also driven by its Chunky ready-to-serve soups, which offset a 1 percent decline in condensed soups. This past September, Campbell cited declining consumption, productivity improvements and a focus on new packaging for the closure of a spice plant and one of its four U.S. soup plants. The closures, which will take place by next summer, will result in the loss of more than 700 jobs. Campbell said it will incur total pre-tax costs of $115 million, most of which will be in its fiscal 2013.

The broader U.S. soup and sauce business rose by 3 percent in the quarter, with volume up 1 percent and prices up 2 percent.

Campbell noted the earlier Thanksgiving this year, which led supermarkets and other retailers to stock up on inventories during the first quarter. As a result, it warned that its second-quarter results could be negatively impacted and lag its full-year growth projections.

Even as it works to revitalize its soup business, Campbell is looking for growth beyond the center aisles of supermarkets where nonperishable packaged foods are sold. The company's acquisition of Bolthouse Farms this summer was intended to give it a stake in premium juice and fresh packaged foods, which are growing more quickly than packaged foods in general.

For the period ended Oct. 28, the company said it earned $245 million, or 78 cents per share, for the quarter that ended Oct. 28. That compares with $265 million, or 82 cents per share, a year ago. Not including one-time items related to its acquisition of Bolthouse Farms and the plant closings, Campbell said it earned 88 cents per share.

Net sales rose 8 percent to $2.34 billion.

Analysts on average expected a profit of 85 cents per share on sales of $2.36 billion, according to FactSet.

Sales for Campbell's snacks and baked goods unit rose 1 percent to $574 million, as Goldfish crackers and new Jingos crackers sales offset a decline in cookies and baked goods. Sales for the beverage unit fell 5 percent to $189 million, due to a decrease in sales of V8 vegetable and V8 V-Fusion juices. The company said it's focusing on growing categories, such as energy and children's drinks.

Marketing and selling expenses in the quarter decreased 3 percent to $254 million, in line with the company's plans to scale back on U.S. soup advertising. Campbell said the decrease is a reflection of other measures it's taking, such as upgraded packaging and in-store promotions.

But Ken Goldman, an analyst for J.P. Morgan, noted that growing a business is difficult when marketing dollars are cut. He also noted that it was the lowest level of marketing as a percent of sales for Campbell since at least 1997.

Campbell stood by its projections for 2013, with earnings expected to be between $2.51 per share and $2.57 per share. Sales are expected to grow 10 percent to 12 percent, primarily because of its acquisition of Bolthouse Farms. Goldman noted that Campbell will need to deliver a strong performance for the rest of the year to meet that target.

Shares of Campbell were down about 2 percent at $36.08.

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