Yahoo Finance Campbell Soup CEO: 'We are experiencing some elasticities' but demand remains strong
Amid a recent barrage of negative reads on the U.S. consumer (see: Target), inflation hasn't stopped shoppers from reaching for their favorite can of soup.
Campbell Soup reported better-than-expected Q1 earnings on Wednesday, detailing that organic sales increased 9% from a year ago on the back of momentum in condensed soup, Goldfish crackers, and Snyder's-Lance pretzels. Sales of U.S. soup, specifically, rose a hearty 15% from a year ago.
"We are experiencing some elasticities," Campbell Soup CEO Mark Clouse said on Yahoo Finance Live (video above), referring to consumer demand decreasing when faced with price increases, "but significantly lower than historical levels."
In other words, consumers don't seem to be balking en masse at the sight of higher prices for Campbell's products while the iconic company passes on costs caused by inflation for commodities and transportation.
Here's how Campbell Soup performed compared to Wall Street analyst estimates:
Net Sales: $2.13 vs. $2.05 billion
Organic Net Sales: +9% vs. +4.7%
Meals & Beverage Segment Sales: $1.13 billion vs. $1.08 billion
Snacks Segment Sales: $999 million vs. $964 million
Diluted EPS: $0.70 vs. $0.62
The company lifted its full-year organic sales growth guidance to 1% to 2% (it was -1% to 1% previously). Full-year adjusted earnings are still seen in a range of $2.75 to $2.85 a share.
Campbell Soup Company stock rose 1.5% to $47.31 during Wednesday's session. Year to date, shares of Campbell are up 8.9% while the S&P 500 Index has seen a 13.6% drop.
"Retail inventory replenishment (which particularly seemed to aid its high-margin soup business) appears a contributor, but the overall results are nonetheless solid," Goldman Sachs analyst Jason English wrote in a new note. "As with peers, the company raised its organic sales outlook for the year on higher prices, while holding its full-year EPS outlook as higher revenue is expected to be offset by higher costs. All-in, we expect the stock to trade higher on the news."
Clouse noted that Campbell recently revealed a "third wave" of price increases as inflation remains among commodities prices such as wheat and cooking oils.
"When you think about our portfolio, we have performed very well in a variety of difficult economic environments," the CEO said. "We tend to have categories even in a world where people are experiencing economic pressure or maybe trading down and making some comprises in what they are purchasing, our categories tend to be good destinations for those value."
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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