Campbell, Smuckers Sales Rise; Kraft Struggles After Spinoff

   By Paul Ziobro 
 

A trio of food makers posted mixed quarterly results Friday, as Campbell Soup Co. (CPB) and J.M. Smucker Co. (SJM) eked out some sales growth, while Kraft Foods Group Inc. (KRFT) saw sales plunge amid some stumbles related to its recent spinoff from Mondelez International Inc. (MDLZ).

The results from Campbell--whose fiscal second-quarter sales, excluding a recent acquisition, rose 1%--and Smucker--whose fiscal third-quarter sales rose 2% excluding a recent purchase--reflected how the makers of brand-name foods are clawing their way back from sales volumes that fell over the past year after steep rises in commodity costs forced companies to raise prices. Campbell's sales volume was flat in the period, helped by a double-digit percentage increase in sales of its line of Chunky soups that rose after the company improved recipes, changed the label and restarted advertising tied to the National Football League.

Smucker, meanwhile, posted a 1% volume decline, an improvement from the previous quarter, but sold more products in two of its top business: coffee and peanut butter. Smucker may ring up more sales of both Folgers coffee and Jif peanut butter in the current quarter, especially after a 10% price cut on peanut butter last month and a planned price cut on coffee in the coming weeks.

Investors are watching closely to see signs that food makers are selling more of their products to show that shoppers still have the stomach to pay for products at higher prices. Time may help get consumers used to higher prices, as does--in the cases of coffee and peanut butter--lowering prices and adopting new marketing strategies.

But Smucker noted it is also a sign that consumers are feeling a little bit better when they head to the supermarket. "We are seeing the consumer be a little more confident and spending a little bit more," Smucker Chief Executive Richard Smucker said.

Kraft faced a more-troubling quarter, with organic revenue--a measure that reflects the company's comparable sales excluding foreign-exchange translation--down 7.2%, a decline deeper than the company expected. The decline occurred as retailers worked through inventory they built up before Kraft's October spinoff from Mondelez, maker of Oreo cookies and other snacks, which kept them from placing new orders.

Kraft's sales also took a hit as it tried to scale back some promotional activity. One of its retailers, which it didn't name, was ramping up its low-price offerings and Kraft's products didn't fit well with the strategy during the December holiday season.

"We definitely stubbed our toe this quarter," Kraft Chief Executive Tony Vernon said.

Kraft, which said year-end inventory levels at retailers had reset to normal levels, backed its sales outlook for 2013. The company also adopted a mark-to-market accounting policy for its post-employment benefit obligations, a change that that allowed it to raise its guidance for the year.

Shares of Smucker, which raised the low-end of its full-year earnings outlook, rose 0.9% to $92.99 after hitting an all-time high of $94.99 earlier. Campbell shares rose 1.5% to $39.30, as earnings exceeded expectations. Kraft shares were flat in recent trading at $47.16.

Write to Paul Ziobro at [e-mail].

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