Campbell Soup Co.'s pandemic boost came to an end, as some customers are returning to restaurants and offices, while higher costs cut into profits.
The soup maker is the latest example of how inflationary pressures are hampering profits for food manufacturers, which are struggling to maintain sales momentum as more people are vaccinated against Covid-19 and the U.S. economy reopens. Campbell and others are raising prices to compensate for higher transportation, commodity and labor costs.
"We expected this to be a challenging quarter, but it was made even tougher as these pressures in some cases were more significant than anticipated," Chief Executive Officer Mark Clouse said on a conference call.
Campbell's shares dropped 8% Wednesday morning to $45.24. Through Tuesday's market close, shares were up 1.6% year to date. Stocks for rivals such as General Mills Inc., Kellogg Co. and Kraft Heinz Co. were also down slightly Wednesday.
Mr. Clouse said he expects higher costs to continue to squeeze Campbell's profit margin in coming months.
In the latest quarter, Campbell's U.S. soup sales plunged 21%, contributing to a 12% decline in overall comparable sales. Its gross profit margin slipped to 31.7% from 34.5% the prior year.
Similar to food makers such as General Mills and J.M. Smucker Co., Campbell said it is raising its food prices this summer to offset some of the higher costs.
"We are going to be very thoughtful about it," Mr. Clouse said. "The last thing we want to do is shut down the growth that we've worked fairly hard to have."
General Mills has said that it expects grocery shoppers to accept the higher price tags coming to stores because inflationary pressures are so widespread. On the other hand, Smucker last week said it anticipates that its higher prices will put a dent in sales volume this year.
Mr. Clouse said Campbell's recent sales decline was due to the comparison to last year's surge in demand for canned food as people stocked their pantries in the early weeks of the pandemic. Food makers received an unprecedented boost last year from the closures of restaurants, workplaces and schools that forced people to eat much more at home.
Campbell, which also makes Goldfish crackers, Snyder's pretzels and Prego pasta sauce, said its overall retail sales were up 9% compared with two years ago. Its soup brands also gained nearly two percentage points of market share—a record for the company.
"We continue to be encouraged by the sustainment of cooking and eating at home , even as Covid-19 restrictions are lifted," Mr. Clouse said.
Overall, Campbell on Wednesday reported $160 million in net income attributable to the company for its fiscal third quarter, down from $168 million for the year-earlier period. Campbell's adjusted profit of 57 cents a share was six cents weaker than analysts projected, according to FactSet.
Sales fell to $1.98 billion for the quarter that ended May 2 from $2.24 billion, roughly in line with analysts' estimate.