Campbell Soup reported lighter-than-expected sales for its latest quarter, but its stock still managed to rise Wednesday.
Campbell (ticker: CPB) said it earned 69 cents a share in its fiscal second quarter, on revenue that fell just over 3% year over year to $2.21 billion. Analysts were looking for per-share earnings of 69 cents on revenue of $2.25 billion.
For the full year, Campbell expects to earn between $2.75 and $2.85 a share, bracketing the $2.79 consensus estimate.
Campbell stock rose 2.6% higher in recent trading to $43.74, while the Dow Jones Industrial Average and S&P 500 were up 1.9% and 2.2%, respectively. although the shares are off 2.7% year to date and have fallen more than 11% in the past year. Campbell lost more than 7% in regular trading Tuesday.
Like many other packaged-food companies, Campbell is dealing with difficult comparisons with the year-ago period, when the pandemic led more people to eat at home. In addition, the company and its peers are dealing with supply-chain issues and higher input costs due to inflation. Campbell predicted core inflation to be in the low double-digits for the full year.
That said, the company has already raised prices to offset these costs and didn't rule out future increases.
Price increases are a tricky tool for packaged-food companies: While they allow the company to pass on increased costs to the consumer, higher prices can lead to lower sales if shoppers pull back or turn to alternatives.
But there isn't much in terms of alternatives for consumers. With inflation at four decade-highs , most packaged-food companies have lifted prices in lockstep . That uniformity means less pressure to discount and provides a little bit of breathing room for margins. Still, analysts have been watching the situation closely, because if companies decide to offer discounts to gain market share when competitors are priced higher, it could lead to price wars.