Campbell sees signs of rising sales ahead of shareholder vote

Soup maker aims to shore up investor support as activist battles for board seats

Campbell Soup Co. said its plan to refocus on its namesake business helped decelerate declines in its U.S. soup sales, but it will take until at least next year to return to growth.

The company is trying to rally support from investors as it heads into the final stretch of a public battle with activist investor Daniel Loeb’s Third Point LLC over board seats and strategic direction.

In the latest quarter, Campbell’s revenue on a comparable basis fell 3%, including a 6% drop in U.S. soup sales. But that marks an improvement from the past year, when its core business suffered double-digit declines. Shares rose 7% Tuesday morning as net sales of $2.7 billion (U.S.) and adjusted earnings of 79 cents per share beat analysts’ expectations, according to FactSet.

“The full year will still be difficult, but it looks like we are getting some traction,” said Interim Chief Executive Keith McLoughlin in an interview. He said ramped-up marketing and store displays for its soups are softening sales declines, though the company continues to face competitive pressure. Campbell has been under pressure to show that its plan to turn around its soup business and expand its newly acquired snacks business will put Campbell’s on a path to higher re- turns. Investors will decide next week in a shareholder vote whether to support the current board and management or the activist investor. Like other food makers, Campbell has broadened its reach into faster-growing areas to make up for lackluster demand for grocery-store staples such as canned soup.

Campbell acquired Snyder’s-Lance pretzels and nuts earlier this year for $6.1 billion including debt, but critics say has left the company overleveraged. In August, Campbell said it planned to sell its struggling fresh-food business and international cookie brands to help pay off that debt.

Campbell says its new strate- gy—following the resignation of prior CEO Denise Morrison—is helping to simplify and focus its business. “We are going back to the basics. ... we had strayed away from the core Campbell’s brand,” Mr. McLoughlin said.

The company said sales of Goldfish crackers and V8 juices also rose in the latest quarter.

Net income fell 29% to $194 billion, while adjusted gross margin—a key metric of profitability—shrank to 31.6% from 36.5% a year ago. The canned-soup maker wrestled with higher prices for aluminum and steel, and for trucking, which has roiled the food industry this year. Mr. McLoughlin said Campbell is working on cutting costs elsewhere to offset those expenses. But it can’t afford to raise prices on soup because it needs to close the gap between its prices and competitors.

Third Point, and its allies including Campbell heir George Strawbridge Jr., say more drastic measures, such as a split of the company into separate soups and snacks business, are necessary.

Third Point has nominated five candidates for Campbell’s board, and influential proxy adviser Institutional Shareholder Services Inc. recommended shareholders vote for them. The activist and the company could agree to a settlement before the Nov. 29 vote, but they each have said previous talks failed.