Campbell Soup leans on eat-at-home demand to lift annual sales forecast

By Juveria Tabassum

(Reuters) -Campbell Soup on Wednesday beat quarterly estimates and raised its forecast for annual net sales growth, banking on a recovery in demand for its soups and frozen meals and a boost from its purchase of Rao's sauce maker Sovos Brands.

After several quarters of declines, Campbell's volumes showed sequential improvement this year helped by softer price hikes as well as recovery in consumer spending as inflationary pressures cool.

Both volumes and price realization in the third quarter were flat, compared with a 2% drop in volumes and a 1% rise in prices in the preceding quarter.

"As consumers continue to focus on stretchable meals, the cooking side of the portfolio benefited in the quarter with notable dollar share gains in condensed cooking and broth," said CEO Mark Clouse on a post earnings call.

Campbell expects an annual net sales growth of 3% to 4%, compared with its previous forecast of a fall of 0.5% to a rise of 1.5%.

"We are encouraged by Campbell's successful acquisition of Sovos, which could help pull the company out of its current lull and reinvigorate growth," said RBC Capital Markets analyst Nik Modi.

In March, Campbell completed its $2.33 billion acquisition of Sovos, which sells products such as pasta sauces, dry pasta, soups, frozen pizza and yogurts.

Excluding items, Campbell Soup posted a profit of 75 cents per share for the quarter ended April 28, ahead of analysts' estimates of 70 cents, as per LSEG data, while net sales also edged past expectations.

Adjusted gross profit margin rose 30 basis points to 31.2% as it benefited from efforts to optimize its supply chain.

The Goldfish crackers owner, however, lowered its annual organic net sales and adjusted profit forecast to "reflect the current pace of consumer recovery," as it continues to see some near-term pressure in its snacks business.

Shares of the company were down marginally in early trade.

(Reporting by Juveria Tabassum; Editing by Shailesh Kuber)