What happened
Campbell Soup (CPB 0.20%) shareholders had a lukewarm week this week as its stock declined 9% through Thursday trading compared to a 0.3% increase in the S&P 500. That drop contributed to a rough year so far for the stock, which is down 18% in 2023 according to data provided by S&P Global Market Intelligence.
The packaged food specialist's shares were pressured by earnings results that described a weakening sales environment.
So what
Campbell Soup revealed on Wednesday that organic sales were up 5% for the fiscal period that ended in late April. That result marked a sharp slowdown from the prior quarter's 13% increase.
The company's sales figure benefited from rising prices, and earnings were bolstered by slowing inflation in key ingredients and transportation expenses. Yet the news wasn't great around underlying demand.
Sales volumes declined, in fact, as some consumers reacted to price increases by choosing other brands. Campbell Soup executives noted rising competitive pressures, too. Yet the company broadly met management's targets and is on track to post a solid fiscal 2023.
Now what
Campbell Soup affirmed the 2023 sales and earnings outlook that management raised back in early March. Organic revenue should still rise by between 9% and 10%, with adjusted earnings expanding by between 5% and 7%. These targets imply that the company is succeeding at balancing priorities like boosting market share and protecting profitability, despite significant pressures on both sales and costs.
Wall Street was apparently hoping to see another upgrade to Campbell Soup's fiscal year targets, but this report shouldn't disappoint patient shareholders. The company is on track to generate higher sales and profits despite the tough selling environment this year. Success in these areas should lay the foundation for faster growth as inflation eases in the coming quarters.
