Campbell Soup expects annual profit below estimates on higher costs

By Aatrayee Chatterjee

(Reuters) - Campbell Soup Co forecast annual profit below Wall Street expectations on Thursday due to higher raw material costs and the impact from its recently sold popcorn business.

Several packaged food companies have been grappling with higher expenses of inputs including olive oil, cocoa, packaging, labor and warehousing, prompting them to undertake several rounds of price increases last year to lift margins.

Campbell's fourth-quarter adjusted gross profit margin increased 80 basis points to 31.4%.

However, the company forecast an impact of 4 cents to annual adjusted profit from the sale of its Pop Secret popcorn business that was completed earlier this week.

Shares of the company, known for its Prego pasta sauces and Pepperidge Farm cookies, were down 3% at market open. The stock has surged about 16% so far this year.

"Given how strong the CPB stock was recently, as well as the lower-quality fourth-quarter beat and the fact that 2025 consensus is coming down, we wouldn't be surprised by a modestly red day," J.P. Morgan analyst Ken Goldman said in a note.

The company forecast adjusted earnings between $3.12 and $3.22 per share in fiscal 2025, while analysts on average were expecting annual profit of $3.23 per share, according to LSEG data.

Organic sales at its snacks division declined 3% in the quarter.

"Much of that (market) share pressure is not a result of pricing or promotional activity, but rather new entrants into our elevated segments like Kettle potato chips, or organic/Better-for-You tortilla chips," said CFO Carrie Anderson.

Net sales of $2.29 billion missed estimates for a 11.7% rise to $2.31 billion. Excluding items, Campbell's earnings per share of 63 cents was higher than expectations of 62 cents.

"Following significant pricing taken by CPB and its peers in recent years, we think stimulating a sustainable volume recovery will prove challenging given that consumers are increasingly displaying signs of strained wallets," RBC analyst Nik Modi said.

Still, the company expects net sales to rise between 9% and 11% in fiscal 2025, above estimates for a 8.92% jump, betting on steady demand for its soups and ready-to-eat meals.

(Reporting by Aatrayee Chatterjee in Bengaluru; Editing by Devika Syamnath)