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What Happened in the Stock Market Today

By Demitri Kalogeropoulos – Sep 1, 2016 at 5:22PM

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Why Campbell Soup and Vera Bradley stocks made big moves on Thursday.

Despite several swings during the trading session on Thursday, stocks barely moved as investors digested fresh data pointing to sluggish economic growth ahead of a key monthly jobs report on Friday morning. The Dow Jones Industrial Average (^DJI -1.98%) managed a tiny daily gain and the S&P 500 (^GSPC -2.47%) index finished flat.

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Data source: Yahoo! Finance.

Yet earnings news drove large price swings in a few individual stocks on Thursday, including Campbell Soup (CPB -1.82%) and Vera Bradley (VRA -2.24%).

Campbell Soup's fresh food stumbles

Campbell Soup was one of the worst-performing stocks on the S&P 500 after the food and snack giant posted disappointing quarterly earnings results. Overall revenue was flat, as management predicted, but organic sales fell despite executive's prior forecast of a slight increase. "I am not pleased with the results," CEO Denise Morrison said in a press release.

Image source: Getty Images.

There were execution issues in the fresh food business, Morrison explained. That division shrunk by 12% thanks to a large decline in carrot sales and a voluntary recall on Bolthouse Farm branded protein drinks. Segment operating revenue sank by 62% -- mainly because of charges related to that recall.

On the positive side, overall profits were strong (adjusted earnings rose 11% over the past 12 months), and healthy cash flow gains helped convince Campbell to boost its dividend by 12%. Meanwhile, the company has a plan to fix the execution problems that sank its fresh food business this quarter.

However, executives said that sales growth, which remains a top priority, will be hard to come by in the next fiscal year. The company projected a revenue improvement of less than 1% for fiscal 2017, which helps explain why the stock took a step back on Thursday. 

Vera Bradley's growth slump

Vera Bradley's 9% daily jump put the handbag and accessories specialist back in positive territory for the year following modestly upbeat quarterly results. Revenue came in as management predicted -- flat against the prior-year period. Vera's comparable store sales fell by 6%, representing a slight improvement over the prior quarter's 7% drop, as customer traffic fell both in stores and online. The company's gross profit margin rose by 2 percentage points, which was just below guidance, due to increased costs and price cuts.

Image source: Vera Bradley.

"Although the overall retail environment certainly remains challenging, we are pleased that we achieved total revenues within our guidance range," CEO Robert Wallstrom said in a press release. "We are also pleased with our 230 basis point gross profit expansion, primarily related to sourcing and operational efficiencies." 

The current quarter will include a major relaunch for the Vera Bradley brand, including a new e-commerce push, which Wallstrom and his team believe will put the company back on a positive sales growth trajectory by the end of 2016. Yet the company lowered both its sales and profitability forecasts slightly. Revenue should tick up to nearly $515 million from $503 million last year. Gross profit margin will show a similar improvement, rising to 58% of sales from 57%. Those aren't exciting prospects on either the top or bottom lines, but the possibility of a turnaround was enough to spark investor interest in a stock that was down nearly 30% since early April.

Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Campbell Soup Company Stock Quote
Campbell Soup Company
$47.01 (-1.82%) $0.87
Vera Bradley, Inc. Stock Quote
Vera Bradley, Inc.
$2.94 (-2.24%) $0.07
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$29,096.56 (-1.98%) $-587.18
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$3,627.02 (-2.47%) $-92.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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